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FROM VICTORY TO DEFEAT

CHINA'S SOCIALIST ROAD AND CAPITALIST REVERSAL

PAO-YU CHING

FOREIGN LANGUAGES PRESS

FOREIGN LANGUAGES PRESS
Collection “New Roads” #1
A collection directed by Christophe Kistler

Contact — redspark.contact@protonmail.com
https://foreignlanguages.press

Paris, 2019
1st Edition

ISBN: 978-2-491182-01-4

This book is under license Attribution-ShareAlike 4.0 International
(CC BY-SA 4.0)

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Preface
J. Moufawad-Paul

Introduction

Question I.

Question II.
Question II. (A)
Question II. (B)

Question III.

Question IV.

Question V.

Question VI.

Question VII.

Contents

Karl Marx anticipated that socialist revolution
was likely to occur first in countries where
capitalism had reached a more advanced stage.
Why did socialist revolution occur first in
Russia and then in China where capitalism
was only in the early stage of development?

How do we determine if China’s development
from 1956 to 1978 was socialist?

How were the relations of production changed
in the state-owned industrial sector?

How did the relations of production change in
the collectively-owned agricultural sector?

How did the superstructure change from feu-
dal and capitalist to socialist from 1949 to
1978, and how important was the Cultural
Revolution to this change?

What were some additional achievements
made during China’s socialist development?

What was China’s socialist development strat-
egy? How was China’s socialist development
different from colonial and semi-colonial
countries pursuing capitalist development?

What Challenges and Difficulties did China

Face During Socialist Construction?

What has happened to China and Chinese
people after the counter-revolutionaries seized
power in 1976?

Seizing Political Power and Implementing
Capitalist Reform

Conclusion

Fundamental Changes in the Relations of Pro-
duction

Fundamental Changes in the Superstructure

China’s Capitalist “Reform and Opening Up”
and the World of Imperialism

China’s Capitalist “Reform and Opening Up”
and China’s Working Class Struggles

Impact of China’s Capitalist “Reform and
Opening Up” on Chinas Land, Resources,

and Environment

China’s Capitalist “Reform and Opening Up”
and the Deep Internal Contradictions

China and Chinese People in the Future of
World Socialist Revolution

89
92

102

110

111

118

119

Preface

Preface
J. Moufawad-Paul

When I was approached to write a preface for this book I was—by
one of those strange coincidences that idealists believe are more significant
than they actually are—rereading Rethinking Socialism, which Pao-yu Ching
co-authored with Deng-Yuan Hsu in 1998. I had assigned selections from
that extended essay in a course I was teaching and was preparing my reading
notes. The request for this preface, then, came right at the moment when |
was being struck with the clarity of Ching’s thought in her 2017 introduc-
tion of the second edition of Rethinking Socialism, which I was only just
reading. Such clarity would also be recognized by my students, the best of
whom found her reframing of the question of “socialist failure” as “socialist
defeat” refreshing and, despite only being assigned selections, avidly con-
sumed the entire work. | assigned this text in a course about the philosophy
of Marxism and post-Marxism following a constellation of philosophical
works, encouraging students to engage with a work of recent radical political
economy in relation to the more abstract texts they had spent weeks reading.

The above anecdote might explain why a philosopher such as myself
is writing an introduction to a book that is ostensibly a work of political
economy. Ching’s work generates categorical distinctions that demand phil-
osophical investigation. Since my training is not in political economy but in
philosophy, my appreciation of Ching’s work functions according to a philo-
sophical register. That is, | am interested in the ways in which she uses these
the categories of political economy to draw clear demarcations in thought so
as to force important decisions in the thinking and practice of politics. As a
Marxist I am of the opinion that political economy is useful for demystifying
its object of analysis with the intention of demanding revolutionary trans-
formation. This is what Marx did, after all, when he left the realm of abstract
philosophy and entered the battleground of bourgeois economic theory.

The Marxist (political) economist ought to understand what is at stake
in their work, that economic perspectives are determined by class struggle,
and thus be able to establish the revolutionary standpoint. The practice of
philosophy is useful insofar as it can compare differing attempts to establish
such a standpoint and clarify the reasons why one position is better than
another. Which is all to say that P’'ve been drawn to Ching’s work, as I have

From Victory to Defeat

been drawn to the work of political economists such as Samir Amin, because
its concern with the practice of making revolution has always rendered it
clear and thus philosophically salient. Therefore, my prefatory comments
will be a small philosophical intervention designed to think about this new
work of Ching’s according to the larger concerns of the Marxist terrain, to
interpret its meaning in the context of what all intellectual labor within this
terrain should be about: revolution, socialist transformation, and the road
to communism.

Ching’s work to date

‘Those readers already familiar with Ching’s contributions to date, and
who are reading From Victory to Defeat: China’ Socialist Road and Capitalist
Reversal because of her past work, can skip ahead since you can probably
guess what I’m about to write by way of introduction. But if you are a reader
who is encountering Ching for the first time, then I feel it is necessary to
introduce her main concerns, the primary object of her critical thought, so
that you can appreciate this book in relation to her total project.

Generally speaking, Ching’s work has been about examining the defeat
of socialism in the last great world historical revolution, the Chinese Revolu-
tion, unveiling the meaning of revisionism to think through the problematic
of socialist transformation. By examining the line struggle in the Chinese
Revolution, and the eventual victory of the Liu-Deng line, Ching has not
only sought to establish key insights about what socialism as a process for
generating communism should be, she has also revealed the ways in which
the revisionism encountered in the course of such a process can be known.
That is, she has rigorously exposed the meaning of both a socialist and revi-
sionist political economy, the latter of which leads to capitalist restoration
and the defeat of socialism by waving the red flag to bring down the red flag.

Before From Victory to Defeat there are two books available in English,
along with numerous articles, which form the sequence of Ching’s thought.
The first of these books is Rethinking Socialism (1998), co-authored with
Deng-Yuan Hsu, which focused on the question of socialist transition in
light of China's great reversal. The second is Revolution and Counterrevo-
lution (2012), which examined the capitalist road taken by China and the
struggles waged in the pursuit of this road. Finally, in her essay The Cur-
rent Phase of Imperialism and China (2017), Ching outlined China’s impe-

Preface

rialist ambitions in contrast to its socialist past. Now we have From Victory
to Defeat: Chinas Socialist Road and Capitalist Reversal, which is the most
focused exposé to date of what the revisionist Liu-Deng road has wrought
upon a social formation that was at one point of time the highest expression
of socialist transition. Such an exposure not only demonstrates how the path
of socialist transition can be compromised and reversed, it also reveals what
is at stake and teaches us what needs to be done so as to rigorously pursue
communism.

Moreover, From Victory to Defeat picks up where Ching left off with
her 2017 introduction to Rethinking Socialism: the aforementioned neces-
sity of thinking of the capitalist reversal as the result of a “defeat” rather
than a “failure” of socialism; the importance of rejecting Eurocentric Marxist
orthodoxy regarding the “failure” of socialist revolutions (i.e. the problem
was that these revolutions happened in “backwards” modes of productions
rather than progressing from a developed capitalism with a proper bour-
geois-proletariat class structure), exemplified in the work of authors such as
Ellen Meiksins Wood.

From Victory to Defeat: China’s Socialist Road and Capitalist Rever-
sal

As with any text it is always important to first understand what the
text zs in order to assess its merits. For example, if a book intended to teach
readers how to play chess did not adequately accomplish its intentions we
would say that it is not a very good book; those defending it as excellent
because it possessed a decent chapter on the history of the game would not
have a very good argument regarding the book’s overall worth because the
book as a whole did not fulfill what it sought to accomplish. So what is
Pao-yu Ching’s From Victory to Defeat: China’s Socialist Road and Capitalist
Reversak?

First of all, it is not a work of descriptive political economy regarding
both China’s socialist past and its current present. Or rather, it is not simply
a work of descriptive political economy. It does indeed describe the political
economic orders of China from the Mao period to the present, and defi-
nitely proves the revisionist distance between the two, but this description is
not primarily about description. But From Victory to Defeat is not intended
to be merely such a work.

From Victory to Defeat

Secondly, it is not merely a historiography of China from the time of
Mao Zedong to Xi Jinping. That is, its intention is not to simply present us
with a historical narrative—counter to both the Western bourgeois and Chi-
nese revisionist historical narratives—of the revisionist fall from grace that
Chinese socialism experienced, the decades long capitalist road upon which
the waystation of Xi’s government has been built. Not that constructing such
an historical counter-narrative is not important, nor can we discount the fact
that Ching significantly contributes to this counter-narrative with this book.
But if we treated From Victory to Defeat as merely a work of revolutionary
counter-history about contemporary China we would again miss out on
what it intends to be through its discussion of Chinese history.

Then what is Ching’s From Victory to Defeat: Chinas Socialist Road and
Capitalist Reversal? It is a political intervention, using the tools of political
economy and historiography that lays out the case for the necessity of com-
munist revolution. The frame of China’s contemporary history is significant
because the Chinese Revolution was the most recent world historical revo-
lution—the current conjuncture remains within its shadow despite those
Marxists who would pretend otherwise—and thus excavating the meaning
of how its socialist construction was reversed is a warning of the obstacles
that any potential socialist state will face. Figuring out how to establish
such socialisms in the shadow cast by the Chinese Revolution, though, is an
immediate necessity according to Ching. After all, she begins this book with
a description of the capitalist nightmare and proclaims, in the opening para-
graphs, the antinomy of “socialism or barbarism” (referencing both Engels
and Luxemburg), which I have also argued should be the way to think com-
munist necessity—and neither myself nor Ching are alone in this insight.
It is the thought of all communists and communist projects that seek to
demarcate themselves from business as usual.

Hence, From Victory to Defeat demarcates the pursuit of socialism
from revisionism, using the tools of political economy and historiography
to explicate this demarcation, and thus delineates itself from Eurocentric
approaches as well as those approaches that seek to naturalize so-called “actu-
ally existing socialism.” The point is to learn from the distance between the
most recent world historical revolution and its reversal in order to understand
how to establish socialism now and be prepared for its pitfalls. Descriptive
political economy and radical historiography are tools, and tools used very
well, to accomplish this intervention. But the point is the intervention and

Preface

the lines of demarcation it necessitates.

Although there are many lessons Ching draws from the experience
of the Chinese Revolution in the course of her intervention, I will examine
only three points of interest that differentiate the socialist road from the
capitalist road. These are points that are foundational to an anti-revisionist
understanding of making communism.

‘The first point is that socialist construction, just like the revolution
that brings about a dictatorship of the proletariat, is not a dinner party.
Mobilizing the masses to transform all aspects of society requires a great
amount of creativity and foresight, as well as scientific wherewithal, to pro-
duce the kind of economy, state, and culture that moves us towards a needs-
based society. The revolution must continue at all levels of social existence
and but also must advance according to communist ideology: it must be, as
the old slogan went, both red and expert.

‘The second point is that class struggle continues under socialism: a
fact that Mao originally made clear, and the Maoism has declared a universal
principle, but one that Ching demonstrates as empirically correct through
her examination of the rise and fall of the Chinese Revolution. Socialism
is fragile, its construction and persistence can always be compromised, and
factions within the communist party itself can defeat the revolutionary line
and re-orientate society towards the capitalist road. Such a defeat often hap-
pens by “waving the red flag to bring down the red flag”—that is, by using
socialist sounding language to enact anti-socialist reforms. This book con-
tains snapshots of how that struggle was borne out, how socialism was con-
structed through this struggle, and how it was eventually defeated when the
revisionists began to win this class struggle under socialism.

(A corollary to the second point is that socialism is not merely a word
or a vague notion but a meaningful concept. We can know what social for-
mations are socialist, or pursuing socialism, by knowing what socialism is,
just as we can know, by the same token, the meaning of its opposite. Such a
conception of socialism was thoroughly worked out in Rethinking Socialism
but operates in this book as well, demonstrated by the differences between
China’s Mao and Deng eras.)

The third point is that even when a socialist revolution is defeated, if
it has advanced far enough down the road to communism before the revi-
sionist detour (and the Chinese Revolution, as Ching demonstrates here,
advanced further than any other socialist revolution to date), then the legacy

From Victory to Defeat

of socialism will remain and will be difficult to stamp out. This is because the
masses, who were mobilized to construct socialism, remained mobilized, and
the memory of this mobilization persists and is being passed down to suc-
cessive generations. Every stage of capitalist reform in China has been forced
to proceed against the masses interest and was a struggle for the capitalist
roaders to establish. The final sections in this book that examine the Chinese
anti-revisionist left today demonstrate that the legacy of the Chinese Revo-
lution and the GPCR is a living memory for workers, peasants, and radical
students. Even defeated revolutions do not easily die; when the masses are
mobilized they understand when they are betrayed.

This third point returns us to the importance of understanding that
socialism was defeated rather than failed. For if socialism was an abject fail-
ure then there would not be significant forces and struggles in formerly
socialist countries coding themselves according to a doctrine of failure. For
why would anyone raise the banner of “the God that failed”? Failure teaches
those who failed that their way of doing things was erroneous. Such struggles
would rather, as liberal pundits who blather on about China like to presume,
resemble that faction of students in Tiananmen Square who were advocating
for USAmerican style capitalism rather than the workers and peasants, in
the same event who were raising the banner of Mao and demanding a return
to the Cultural Revolution. Indeed, both Western pundits and the Chinese
Government ignored the larger rebellion in Tiananmen, framing it around
the neo-liberal student groups. Neither the Western media nor the Chinese
government wanted to admit, though for oppositional reasons, that there
was a socialist element to the rebellion. For if socialism was defeated rather
than simply failed, it remains a live option, a vital legacy.

Demarcating Communism

When I began reading this book I had just finished reading the
manuscript of the soon-to-be-published science-fiction novella, And Shall
Machines Surrender, by my friend, occasional analogical inspiration, and
sometimes collaborator, Benjanun Sriduangkaew. In that space opera novella
a distant future

Dyson Sphere utopia is named after Shenzhen, the special economic
zone that Ching examines as paradigmatic to China’s capitalist Reform.
What struck me was that the distance between Sriduangkaew’s fictional

Preface

Shenzhen Sphere and the actual Shenzhen was also the distance between the
revisionist “Marxist-Leninist” delirium of “market socialism” and its reality.
‘The science fiction, intergalactic Shenzhen possessed the stability and lack
of poverty that the real Shenzhen does not since the latter has functioned to
destabilize socialism and generate impoverishment. Those “Marxists” who
maintain that China is socialist have a notion of post-Mao Reform that is
akin to imagining future Dyson Spheres: that is, they have a completely
fantastic and fictional understanding of reality. I would like to hope that
some of them would read Ching’s book and change their perspective—that
they would grasp the fictional and fantastical basis of their previous concep-
tions—but I am also aware of the strength of revisionist ideology since it is
the long shadow cast by capitalist ideology.

But for those readers who want to learn from the actual lessons of the
Chinese Revolution, if there is a single lesson that we can derive from this
book, it is that socialism, as well as its communist destination, is indeed a
live option and vital legacy. Ching presents us with a choice regarding the
meaning of socialism: do we see it as simply a name that is meaningful
insofar as it is attached to a number of actually existing regimes, or do we
understand it as a concept that spills beyond this act of simplistic naming; is
socialism merely a formality or does it possess real content? This antinomy
does not imply that Ching, like so many academic Marxists, is trapped in
the dilemma of rejecting the great socialist experiments because they do not
resemble an ideal notion of socialism that exists only in the imagination of
Marxist purists. She rejects this interpretation as well; her understanding of
socialist transition grants that there were socialist revolutions. Her distinc-
tion between name and concept and form and content is not an idealist
exercise that bans all real world attempts of making socialism to the realm of
the a priori doomed because they fail to satisfy some vague notion of Marxist
puritanism. She has already told us that there were socialist formations, and
there are reasons that they can qualify as such, but the reason they did not
persist was because they were defeated.

In the end, the line Pao-yu Ching draws between the name/concept
and form/ content of socialism is also the line drawn between revisionism/
anti-revisionism and counter-revolution/revolution. If we want to even
begin to think communism then this is precisely the line that needs to be
demarcated.

Introduction

Today an overwhelming majority of people is struggling to survive
from day to day or month to month. They face a bleak and hopeless future.
The discontent of the masses of people has reached the highest since any
time post World War II. Since the end of the war, imperialist countries have
gone through many rounds of reform. Political representatives of the cap-
italists, such as the social democrats, made repeated promises for a better
society, which were then broken and their memories faded away. Since the
late 1970s, after the latest neoliberal restructuring of the global capitalist
system, the world capitalist system has gone through severe crises in the
1980s, 1990s, with the worst crisis in 2008-2009, which has lasted for an
entire decade. Today the living conditions of the working masses in impe-
rialist countries have grown increasingly difficult. Labor productivity has
increased substantially but workers’ wages have stagnated and benefits con-
tinued to decline. At the same time, for most working people, jobs have
become more precarious as more workers are employed on a temporary and
part-time basis. Yet the basic cost of living, such as rent, food, utilities and
other necessities of life has continued to rise, resulting in an accumulation
of debt for workers and their families. Meanwhile the dominant capitalists,
a tiny percent of the population, have accumulated an almost unimaginable
amount of wealth and are living obscenely lavish lives.

Moreover, the suffering of people in colonial and semi-colonial coun-
tries has worsened. On top of many years of colonial rule, imperialist powers
have continued their political and economic domination even after people
in these countries fought and won their “independence.” The dream of the
national bourgeoisie in these countries in the early post-war years to develop
capitalism independently has been resoundingly smashed after the crises
in 1982-85 and then in 1997-99. After rounds of restructuring by global
monopoly capital, assisted by international financial institutions such as the
International Monetary Fund (IMF) and the World Bank (WB), these coun-
tries went through rounds of austerity programs to cut public health and
education, already severely under-funded. The Structural Adjustment Pro-
gram (SAP) imposed by the IMF on these debt-ridden countries demanded
financial deregulation and privatization in order to facilitate the takeover of
these assets by foreign capital. Labor reform programs forced these countries

From Victory to Defeat

to keep their labor market flexible including longer working hours, lowered
wages and relaxed restrictions on other working conditions, as well as pre-
vention of labor organizing. Even before the latest global neoliberal restruc-
turing, colonial and semi-colonial countries had never established political
or economic sovereignty. After the neoliberal restructuring they had little
choice but to accept the conditions demanded by global monopoly capital,
because their hope to develop their own economies no longer existed. They
have since opened their borders for imports of foreign capital and commod-
ities (including basic food) and have joined the new global division of labor
by exporting products produced by cheap labor via the global supply chain.

‘The appetite of monopoly capital is insatiable; it must assert control
over all aspects of people’s lives in order to gain a “competitive advantage”
over its rivals. Global monopoly capital has taken further steps to deprive
people in colonial and semi-colonial countries the ability to produce goods
for their own consumption by imposing rules set by capitalist representa-
tives, such as the World Trade Organization (WTO), to protect the intellec-
tual property rights of giant corporations. These multinational corporations
from imperialist countries, such as Monsanto and others, take the seeds of
crops and other plants cultivated and improved upon by many generations
of peasants and genetically modify them to claim them as private property
protected by the WTO’s intellectual property rights. Similarly large interna-
tional pharmaceutical companies take ancient traditional medical remedies
used by indigenous people and turn them into patent-protected profit mak-
ing commodities. These international corporations take what used to belong
to the commons, shared by all people in their communities for thousands
of years, and turn it into privately owned monopolized profit-making com-
modities. The consequence has been tens and even hundreds of millions of
peasants in colonial and semi-colonial countries losing their ability to use
their own seeds to produce food and medicine for survival.

‘The insatiable need for capital to expand has led to overproduction
that over-tills the land, over-grazes the pastures, over-fishes the rivers and sea,
exhausts the planet’s resources and unleashes fatal amounts of chemicals and
waste into the ground, air, and water, causing critical damage to the earth
and people’s health. Policies carried out by the representatives of monopoly
capital are destructive and brutal. The latest neoliberal restructuring swept
away all the barriers for its global expansion causing more and more people
to realize that they must fight back if they do not want to be swallowed alive

Introduction

by ever more powerful monopoly capital.

In addition to brutal political and economic oppression there have
also been seemingly endless wars. In order to maintain its hegemony, the
United States has used its superior military power to impose wars on rela-
tively defenseless nations and peoples. The destruction caused by these end-
less wars has gone far beyond the previous two World Wars. I think we have
again arrived to the point where Friedrich Engels concluded, “if the whole of
modern society is not to perish, a revolution in the mode of production and
distribution must take place.”’ And what Luxemburg reminded us a hun-
dred years ago when she wrote, “bourgeois society stands at the crossroad,
either transition to socialism or regression into barbarism.”” Revolutionaries
heeded these warnings; they did not sit idly by waiting for capitalism to
destroy them. Revolutionaries in Russia under Lenin’s leadership took up
arms and won the first nation-wide socialist revolution.

The 1917 Russian Revolution and the 1949 Chinese Revolution were
the two most important historical events in the 20" century. The Cuban
Revolution succeeded in 1959 and though it was smaller in scale, it had
significant influence especially in Latin American countries. These heroic
revolutions were all led by communist parties, the vanguard of the proletar-
iat. Now another hundred years later the Russian revolution and the Chinese
revolution have both been defeated. The Communist Party in the USSR
embarked on revisionism in 1956 and the Communist Party in China ini-
tiated capitalist reform in 1978. In 2018, one hundred years after Luxem-
burg’s warning to modern society, all of humankind is again facing total
destruction. What are we to do?

We have the choice of either burying our heads in the sand and
accepting the verdict of leading capitalist propaganda that socialism has
failed and capitalism has won, thus signaling the end of history, or we can
choose socialism over barbarism like our courageous forbearers in 1917 and
1949 and many of our contemporaries today. They chose to struggle against
capitalism and for socialism. The current reality could not be clearer and the
choice is entirely ours.

On the one hand, we are in a better position than revolutionaries
before our time, because they were able to prove that armed struggle with

' Anti-Dubring, the International Publisher’s (New York) edition of 1987, 146.

* Rosa Luxemburg attributed what she said to Friedrich Engels in her “Junius Pam-
phlet” of 1916.

From Victory to Defeat

the goal of achieving communism could be won. ‘The dictatorship of the
proletariat was proven possible. This has given us tremendous confidence
and optimism. On the other hand, at some point on the road of socialist
development, revisionists seized political power and reversed the develop-
ment from socialism to capitalism. There have been some analyses of why
and how socialist development was aborted. However, these explanations
have not satisfied critics who think that socialism may look good on paper
but that it is incompatible with human nature. According to them, pointing
to the many communist party officials who enriched themselves by rob-
bing the wealth from the working masses, once people possess power they
are invariably corrupted. In other words former revolutionaries turned into
new exploiters and oppressors. We certainly cannot deny that corruption
happened countless times in socialist countries. However, there were many
more examples of powerful communist party members who sacrificed them-
selves (some with their lives) to advance the interests of people toward their
common goal of communism. The statement of “power corrupts” is not a
statement of truth. Human nature is vot the problem behind corruption but
the abuse of power is.

Although the concept of “power corrupts” has had a long history
among the Left, in recent years where the anarchist movements are strong
(mainly in imperialist countries), the fear of power itself has also become
more prevalent.’ Such fear has rendered the Left impotent in their struggle
against the centrally organized and highly concentrated power of capital. In
many left organizations in these countries, power is considered too concen-
trated unless it is shared equally among all of its members. ‘The leaders, if
there are any, should only be allowed to make decisions when they are based
on the consensus of all members in the group. While it is true that abuses
occur in organizations with only centralism without democracy, it is equally
true that an organization is rendered totally powerless if no one is permitted
to lead for fear of the concentration of power. The result has been that such
“horizontally organized” bodies cannot generate leadership to plan for the

> The “power corrupts” debate has a long history. It has existed between the socialist
(both utopian and Marxist) and the anarchists since the 19 century everywhere in
the world. What’s new now is that since the end of the anti-revisionist wave (the early
80s) the anarchists have grown stronger in imperialist countries and have broadly
spread those ideas in the Left and in academia (with such rhetoric as “radical subjectiv-
ity” in philosophy, “workers’ self-management” in economy, and “radical feminism,
etc.) Nowadays these ideas are particularly cherished by post-modernists.

Introduction

long-term in their fight against powerful capital. These organizations often
degenerate to the point where members engage in endless debates and only
at the level of tactics.

If there had not been centralism there could not have been any social-
ist revolution or any socialist development. That said, centralism without
democracy indeed bred abuses in former socialist countries. Therefore, the
question is not “how power corrupts” but “how corrupting power can be
checked and corrected.”

‘The reality we face today is that after one hundred years the two major
and several smaller scaled attempts to build a new socialist mode of produc-
tion and distribution with the goal of reaching communism, were aborted.
Historically, achievement in human development has always been a con-
tinuation of contributions made by successive generations. On the road of
historical progression there will always be advances and retreats. Revolution-
aries in our current era need to take the progress and defeats toward the goal
of communism as precious lessons learned. We are fortunate, because we
have not only inherited the wealth of revolutionary theory by Marx, Lenin,
and Mao—we have also inherited the concrete experiences of building a
socialist society in the Soviet Union from 1917 to 1956 and in China from
1949 to 1978, as well as their subsequent defeats. Such a wealth of knowl-
edge accumulated by the lives and deaths of past revolutionaries has been
passed on to us, allowing us to study and understand how they succeeded,
what their accomplishments were, what challenges they faced, and how and
why they were eventually defeated.

In the following sections, I present an analysis of China’s socialist rev-
olution and socialist development by positing several questions and then
attempting to answer them. I chose this format because, from my observa-
tion, revolutionaries in general and Maoists in particular have formulated
these questions and are searching for answers. In this presentation I hope
to analyze the achievements of China’s socialist development as well as the
difficulties and challenges the Chinese revolutionaries faced when building
a new society that fundamentally changed the economic base and the super-
structure.

Maoists today rightfully regard the Great Proletarian Cultural Revo-
lution as the most important event in the Chinese revolution. “Bombarding
the headquarters” undoubtedly ignited the revolutionary passion and enthu-
siasm of the Chinese people, especially in young people, as well as revolu-

From Victory to Defeat

tionaries in the rest of the world. However, it is just if not more important
to have a deeper understanding of what the Cultural Revolution in China
was trying to defend. Without the Cultural Revolution, the counterrevolu-
tionaries would have been able to carry out their capitalist reversal in 1966
instead of 1978. If that had been the case, all the socialist programs put in
place during the Cultural Revolution, such as changes made in industrial
organization, in education and health, in arts and culture, and practicing
democracy and much more, would have not been put into practice. More-
over, all the basic and concrete progress made before 1966 in the economic
base and in the superstructure for socialist development would have been
smashed—not during the years since 1978—but more than a decade earlier.

What I would like to emphasize here is: when revolutionaries decide
to choose socialism over barbarism, and when they struggle against capital-
ism and for socialism, we need to have a deep and concrete understanding of
what socialism is. Simply put: how and in what way socialism is the antith-
esis of capitalism.

Question I.

Karl Marx anticipated that socialist revolution was likely to occur first
in countries where capitalism had reached a more advanced stage. Why
did socialist revolution occur first in Russia and then in China where
capitalism was only in the early stage of development?

As the title of his most important work suggests—Capital, Vol. 1 A
Critical Analysis of Capitalist Production—the focus of Karl Marx’s analysis
was on capitalist production. From his analysis he foresaw that the prole-
tariat in countries where capitalism had developed would lead the socialist
revolution. At a commemoration of the 150" anniversary of The Communist
Manifesto, Ellen Meiksins Wood, then editor of the Monthly Review, offered
her explanation of the historic “failures” of socialism. Wood’s premise was
that socialism has failed because attempts were not made “in the kind of
society that Marx regarded as the right foundation for socialist transforma-
tion.“ It is true that Marx did not anticipate that socialist revolution would
occur in Russia where capitalism was only in the early stage of development,
because he did not foresee the emergence of imperialism, which changed
the revolutionary situation in the world. In /mperialism: the Highest Stage
of Capitalism Lenin made clear how the opportunity existed objectively for
countries at the weakest links of the world imperialist system to make social-
ist revolution, even if capitalism in these countries was still in an early stage
of development.

Imperialist countries fought furiously to prevent colonial and
semi-colonial countries from developing capitalism so that they could con-
tinue pillaging resources from them for the raw materials they needed for
industrialization. Had less developed countries begun to develop capitalism
independently, advanced capitalist countries would have lost access to raw
materials as well as export markets for their surplus capital and surplus prod-
ucts. Therefore, imperialist countries used brute force to suppress struggles
for national liberation and development around the world. Even after former
colonies gained their independence in the 19 and the 20" centuries, today
they still do not have political sovereignty. Without political sovereignty they

* Ellen Meiksins Wood on the “Zhe Communist Manifesto After 150 Years” published
in the May 1998 issue of Monthly Review, 29.

From Victory to Defeat

have been denied economic sovereignty, i.e. the freedom to use their own
resources to develop their own countries.

The lack of independent capitalist development in these countries
resulted in a weak national bourgeois class. The lack of independent capi-
talist development and a weak national bourgeoisie are opposite sides of the
same coin. A weak national bourgeoisie means that this class is too weak to
fend off the invasion of foreign capital and so weak politically, that they need
the support of the domestic landowning class to rule nationally. This is the
reason why many of these countries have not been able to carry out genuine
land reform to end feudalism. In other words the national bourgeoisie is not
strong enough to lead a democratic revolution—a democratic revolution
necessary for the development of capitalism.

The Russian Revolution in 1917 demonstrated that the proletar-
iat could successfully launch a socialist revolution. It proved to the world
that the working class did not need to wait for the bourgeoisie to complete
the democratic revolution and to develop capitalism before they liberated
themselves and charted their own path of development. In the famous Chi-
nese revolutionary drama The East is Red, an announcer gives an historical
account of the Chinese revolution exclaiming, “The October Revolution
sent us the teaching of Marx and Lenin. Follow the Russians, this is our
way!” It’s difficult to emphasize enough how much the Russian Revolution
inspired working people of the world. The Chinese people under the lead-
ership of the Chinese Communist Party followed the heroic example set by
the Russian revolutionaries.

In January 1940 in the midst of defending China against the Japa-
nese imperialist invasion Mao wrote On New Democracy.’ In this essay Mao
further elaborated on the meaning and importance of a new democratic
revolution led by the proletariat. Mao analyzed the historical characteristics
of China and how China's revolution would be an integral part of the world
revolution. Mao asked, “Should China follow the West through the dicta-
torship of the bourgeoisie?” He opposed this idea, writing, “In the first place
international capitalism or imperialism will not permit the establishment
in China of a capitalist society under a bourgeois dictatorship. Indeed the
history of modern China is a history of imperialist aggression, of imperialist

> Mao oe On New Democracy, January 1940, Selected Works of Mao Tse-tung,
Vol II, 339-384, Foreign Languages Press, 1977.

Question I.
opposition to China’s independence and to her development of capitalism.”°
Mao illustrated (after the victory of the first socialist revolution) that the
international situation had become a struggle between capitalism and social-
ism, in which capitalism was in decline and socialism was on the rise.

Mao further asserted that socialism would not permit the dictatorship
of the bourgeoisie in China. He said that all the imperialist powers in the
world were China’s enemies and that China could not possibly gain its inde-
pendence without the assistance of socialist countries and the international
proletariat, meaning the Soviet Union and the proletariat in Japan, Britain,
the United States, France, Germany, Italy and other countries, through their
struggle against capitalism. Today socialist countries no longer exist, but the
truth remains that the success of any socialist revolution in any country
requires the support and participation of the international proletariat in all
countries. As monopoly capital from different capitalist countries unites to
pursue its common interests, the solidarity of international working people
is a necessity now more than ever.

During the Chinese revolution, the Chinese Communist Party, van-
guard of the proletariat, was very clear from the beginning that the prole-
tariat-led new democratic revolution would proceed to a socialist revolu-
tion with the goal of reaching communism. After the 1949 victory the new
Chinese government seized the assets of the Kuomintang and confiscated
assets of foreign capitalists and compradors. Together these assets accounted
for 80% of China’s total assets. The remaining 20% consisted of factories
and commercial enterprises owned by the national bourgeoisie. In 1949 the
principle contradiction in Chinese society was between the landowning class
and the vast majority of the Chinese people. After Land Reform was com-
pleted in 1953 the principle contradiction changed to one between the cap-
italists who still owned the factories and other commercial enterprises and
the proletariat. By 1956, through different programs, assets in these privately
owned enterprises were successfully transferred to the State.

Almost 70 years after the Chinese revolution it has become even more
obvious that colonial and semi-colonial countries do not have any chance to
develop capitalism independent of the imperialist countries. Starting in the
1980s the bourgeoisie in these countries began to realize that their dreams
to develop their own independent capitalism would never be realized, so

® Tbid.

From Victory to Defeat

they sold the interests of their countries to international monopoly capital
and took a cut in the profits. There may still be a few of them stubbornly
fighting on. However, in today’s imperialism the national bourgeoisie is a
contradictory and antiquated concept. Working masses in these countries
can only rely on themselves for the development of their countries with the
goal of improving their lives and of building a better society for their future.
Revolutionaries in these countries have no other choice but to organize and
be part of the worldwide socialist revolution.

Question II.

How do we determine if China’s development from 1956 to 1978 was
socialist?

In 1956 the ownership of the means of production in China’s indus-
trial enterprises was transferred to the State. At the conclusion of Land
Reform in 1953 the collectivization of agriculture began and People’s Com-
munes were formed in 1958. According to the analysis my co-author Deng-
yuan Hsu and I made in Rethinking Socialism, this transfer of ownership by
itself was not an indication that China had begun to be socialist. Whether
China proceeded to develop socialism or capitalism depended on what hap-
pened after the means of production were transferred to the State and after
the formation of the People’s Communes. Therefore, an account of concrete
policies carried out after 1956 is necessary. From 1956 to 1976 the CCP
pushed forward concrete policies that fundamentally changed the relations
of production in both China’s industrial and agricultural sectors, making
them socialist.” There were also basic changes in the superstructure. Funda-
mental changes in the relations of production (the ownership and control
in the means of production) and fundamental changes in the superstructure
(political, ideological and cultural) are basic yardsticks to determine whether
a society is capitalist or socialist, as explained below.

From Victory to Defeat

Question IT. (A)

How were the relations of production changed in the state-owned in-
dustrial sector?

A set of concrete policies fundamentally changed the relations of pro-
duction in the State-owned industrial enterprises: (1) phasing out commod-
ity production, and (2) phasing out labor power as a commodity.

Phasing out commodity production in state-owned enterprises

During China’s socialist transition the State decided what and how
much each industrial enterprise produced according to a national plan, which
was based on the current and future needs of the people and the country.
‘The State decided on investment plans to replace old machinery/equipment
and additional investment for expanded production. ‘The State also provided
the enterprise raw materials, machinery and equipment at pre-determined
prices, and it “purchased” the outputs produced also at predetermined prices.
‘The individual enterprise handed over any “excess revenue” over its “expen-
ditures” to the State. The amount of this “excess revenue” was not considered
“profit,” because the price of its inputs and outputs were artificially set by the
State. This “excess revenue” was not used as an indicator to judge how well
the enterprise was run. The measure used to judge the efficiency of the enter-
prise was a comparison with past records—whether the enterprise produced
more and better outputs at a faster rate, and if they managed to conserve
more resources. Thus, “profit” and “loss,” important indicators in a capitalist
economy ceased to have any meaning. This was the method by which state-
owned enterprises were divorced from profit maximization.

When commodity production was being phased out of the state sec-
tor, the law of value (equal value exchange) lost its function to regulate the
economy. In a capitalist economy market prices serve the function of reg-
ulating supply and demand and prices have the function of directing what
to produce and how resources are allocated. In a capitalist society resources
go to where the production yields the highest rates of profit. When the state
sector was phasing out commodity production in socialist China, the law of
value ceased to direct the resources to different kinds of production. Instead,
the economic plan did. The economic plan made it possible to change the

Question II. (A)

purpose of production from profit maximization to producing use value for
the satisfaction of the needs of people and the needs of the country (both
current and future needs).

In socialist China the economic plan determined how resources were
allocated for the production of consumer goods such as food, clothing,
healthcare and housing, etc. or for the production of producer goods such
as machinery, equipment, infrastructure and buildings. The economic plan
had to be carefully and deliberately considered to balance allocating very
scarce resources between producing consumer goods, which satisfied the
current needs of the population, and investment goods, which increased
the capacity for future production. Moreover, among different kinds of con-
sumer goods, preference was given to the most urgently needed consumer
goods, such as food, clean drinking water, clothing and housing, as well as
basic services, such as health care and education, etc. In the economic plan
these basic products and services were priced artificially low so all urban
residents could afford to buy them.* On the other hand in the early stage
of development, other consumer products, such as wristwatches were con-
sidered “luxury” items, so the price for watches was set artificially high (not
reflecting the costs of production), at say 100 RMB. At this price it took the
average income worker a couple of years to save enough to buy a watch. In
an early stage of development only small amounts of resources were allocated
to produce goods like watches.

Among producer goods, heavy industry that produced machinery and
equipment was given high priority, because it was the foundation of indus-
trialization. Heavy industry produced machinery for light industries such as
textiles. However, during industrialization in the Soviet Union, too much
emphasis was placed on heavy industry at the expense of light industry and
agriculture, and the result was shortages of food and other consumer goods.
China learned from the experiences of the Soviet Union and strove not to
repeat its mistakes. Mao wrote On the Ten Major Relationships in 1956 when
industrialization just began.? The first major relationship was the relation-
ship between heavy industry and light industry and between industry and
agriculture. Here Mao wrote, “The emphasis in our country’s construction

8 In cities food and cloth aaa were rationed and sold at low prices to ensure
every resident could afford to buy them.

” Mao Zedong, On the Ten Major Relationships, April 25, 1956, Selected Works of Mao
Tse-tung, Vol. V, Foreign Languages Press, 1977.

From Victory to Defeat

is on heavy industry. The production of means of production must be given
priority.”’° But later in the next paragraph Mao cautioned that China should
not repeat the USSR’s (and Eastern European countries’) mistake of placing
a “lop-sided” stress on heavy industry at the neglect of agriculture and light
industry, resulting in a shortage of goods and unstable currency. He advo-
cated for economic planning that carefully considered the balance between
industry and agriculture as well as between heavy industry and light industry.

Of course, in drawing up the massive economic plan for the entire
country, people made mistakes; it was a very complicated endeavor encom-
passing many sectors of the economy and the relationships between these
sectors. However the damage of those mistakes could be minimized if they
were quickly discovered and corrected. A successful economic plan took
constant adjustments and readjustments and people became more skilled by
drawing on past experiences. Capitalist propaganda relentlessly claims that
relying on the blind forces of the market achieves better results compared to
a carefully and consciously planned economy. This is simply untrue.

Only under socialism do we move away from producing commodities
for the sake of maximizing profits. When we contrast the planned economy
with the capitalist market economy we can understand the superiority of
socialism. This paper explains the irrational and disastrous results of cap-
italist economy dictated by the blind forces of the market where produc-
tion of commodities is based on profit maximization, even more acute in
the age of imperialism—the last stage of capitalism. In more recent decades
damage done to colonial and semi-colonial country economies have become
even more severe after international monopoly capital broke down all bar-
riers and expanded to every corner of the world. After their economies were
forcibly integrated into the domain where international monopoly capital
dominated, they lost control over their resources. The law of value applied in
this domain has taken away the people’s rights to simply live. Here are some
concrete examples.

We see many cities in the world—even cities in poor countries—
where modern high-rises and six-lane highways exist side-by-side with urban
slums occupied by homeless people living in deplorable conditions. These
countries often lack the resources to build the most essential infrastructure,
such as water purifying plants, because their first priority is to use a large

10 Tbid.

Question II. (A)

percentage of its income to pay the interest on debts they owe to foreign
banks and international financial institutions. Moreover, in the era of neo-
liberalism these countries have been forced to agree to dismantle any barriers
to foreign investment. Some of the very first foreign investments that rushed
in were often large soda pop companies such as Coca-Cola and Pepsi-Cola,
because the amount of investment to build bottling plants is very low, while
the profits are very high. These giant US soda pop companies simply bottle
sugar water with their secret formula protected by WTO patent rights and
wait for the profits to roll in. The poor who cannot afford to buy soda or
bottled water have to drink contaminated water and suffer many waterborne
diseases, because their governments don't have the funds to build water treat-
ment plants. Is the market mechanism really a rational way to allocate a
country’s resources when people are being denied clean water while large
multinationals are reaping high profits? Wouldn't people have been better
off if their economy had been planned and building water treatment plants
was given top priority?

‘There are many examples to show that relying on market forces has
produced detrimental results for people in colonial and semi-colonial coun-
tries suffering from high unemployment and low income. Their rulers have
surrendered to the power of global monopoly capital and bought the lie
that in the today’s globalized world a country can find its niche in the inter-
national market based on its comparative advantages and then just export
commodities to become prosperous. The result is that many countries pro-
duce similar products and the export prices of these products plummet.
One example is when the global market was flooded a few years ago with
exported watches, with China in the lead. Prices of watches dropped to a
ridiculously low. Once someone in the United States showed me his watch
collection—one hundred watches of different styles and colors displayed in
a very large fancy case. He proudly boasted that his collection did not cost
him very much; middle-income people in imperialist countries who are not
rich enough to own a fleet of expensive cars or a fancy big house can now
afford a collection of watches. A watch collection is a clear case of commod-
ity fetish, where the watch as a commodity is completely divorced from its
use value, which is to tell time. This clear case demonstrates how the alloca-
tion of resources is distorted in imperialism. When following international
market forces, too many colonial and semi-colonial countries over-allocate
their resources to produce commodities for export—so that people in impe-

From Victory to Defeat

rialist countries can collect them at a low cost to satisfy their fetishes—and
under-allocate resources to produce goods that their people urgently need,
such as food, clean water, basic health, education, and housing.

Moreover, the market is irrational when it comes to critical decisions
about new investment and technological change. A business in a capitalist
economy must constantly expand in order to maintain or increase its market
share. If a business fails to do so and its market share shrinks, at some point it
has to declare bankruptcy. Therefore, constant expansion is a necessity in the
world of business under capitalism. Expanding a business means constantly
developing new products, adopting new technology and investing in new
production plants. The result is that often factories are abandoned while they
are still in good condition and could be used to produce useful products.
Capitalist propaganda has us believe that constant and mindless phasing out
and discarding of old products, old technology, and old plants at the speed
required by the market is a sign of progress. Actually the exact opposite is true.
Only when we as humans take control of our own destinies can we rationally
and consciously make decisions about when to replace old plants with new
ones by weighing the usefulness of the old plant, the resources needed to
produce new plants, and the consequences to the environment when shut-
ting down the old ones.

Here is a concrete example of how a real business under capitalism
makes decisions about when to invest in new products: Andy Grove, former
president of the major high-tech firm Intel, explains why they were already
working on several new models to replace their next generation chips even
before they were launched as such: “It’s the cannibal strategy; we eat our
children and do it faster and faster. That is how we keep our lead.”"' All high-
tech businesses have adopted the same strategy. When the iPhone first came
out Apple proudly unveiled its innovative new product. But Apple soon had
to render the first iPhone obsolete by putting out the iPhones 2, 3, 4, etc.
Apple is now selling the iPhone X. Propaganda for capitalism defends such
waste by saying, “planned obsolescence is the hallmark of progress.”

In addition to “planned obsolescence” that continuously squanders
the earth’s precious resources, there is the added destruction brought upon
by repeated business cycles. During the upturn phase of the cycle businesses
must prepare themselves for further expansion, so they feverishly add more

4" hetps://www.wired.com/1998/03/inside-intels-new-ceo/

Question IT. (A)

productive capacity knowing that this excess capacity will be destroyed when
the economy goes south. Since the later part of the 20" century the business
cycle has become shorter due to the more speculative nature of investment.
‘The destructive power of capital on the environment multiplied in the era of
neoliberalism when colonial and semi-colonial countries accepted the rules
set by global monopoly capital, removing all barriers for foreign capital to
flood in freely. They competed with one another to provide global monopoly
capital with the most incentives by keeping their wages low and working
conditions flexible and by lowering taxes and imposing the least stringent
environmental regulations. In the mid-1990s these incentives attracted large
flows of foreign capital to Southeast Asian countries and littered these coun-
tries with new factories that produced similar cheap products, like clothing,
shoes, toys, electronics, etc.

‘The capitalist propaganda machine declared that an economic miracle
had arrived in Asia and that the 21% century would be the “Asian Century.”
Then in 1997-98 a widespread economic crisis decimated these economies
and almost all of the newly built factories were idled. Paul Krugman, a bour-
geois Nobel Prize-winning economist, equated this economic crisis suffered
by 660 million people in seven countries, which had produced a quarter
of the world output, with the 1929 Great Depression in imperialist coun-
tries.'? The crisis started in Southeast Asia and spread to Russia, South Korea,
then to Brazil and beyond causing more suffering for additional hundreds
of millions of people. The Latin American countries, which had suffered
continuing crises since the 1980s plunged into deeper crisis extending from
Argentina, Brazil, Mexico, to Uruguay, Paraguay, Bolivia, Columbia, and
Peru. We are compelled to ask: if this is not barbarism, what is?

We can no longer afford the kind of progress that comes from “planned
obsolescence” or the waste and suffering brought by the capitalist business
cycle. The amount of resources—fossil fuels, metals, plastic and minerals—
required to make new products at a faster and faster rate dictated by the
market and then disposing of them soon after they are made, as well as the
destruction brought by repeated capitalist crises, is overwhelming the earth.
As we carefully examine the last stage of capitalism we find a seemingly
unstoppable monstrous system sweeping the world by unleashed global
monopoly capital, ruthlessly ripping apart the people, land, and environ-

"Paul Krugman, The Return of Depression Economics, WW. Norton & Co.,
1999.

From Victory to Defeat

ment. Imperialism immensely benefited monopoly capital, but it is devas-
tating the majority of the world’s population, exhausting its resources and
destroying its natural environment. This kind of progress we do not want
and cannot afford. We are facing a well-documented environmental crisis
unprecedented in human history.'’ Capitalism, dictated by the will of capital
for limitless expansion, is on a collision course with the limits of the planet
where all of us reside.

Socialism is the only kind of development that can stop the earth
from destruction. During socialist construction in China the economy did
not depend on the whims of the capital for production and investment deci-
sions, and it did not suffer from the ups and downs of the business cycle.
Decisions about new technology were not based on an obsession for market
share but were made rationally by carefully considering all relevant factors,
including conserving resources, concern for the environment and also for
the value placed in the labor imbedded in producing machinery and equip-
ment. While the capitalist market always drives businesses without the new-
est technology out, socialist economy demonstrated that more enterprises
with less advanced technology can coexist with those with more advanced
technology as long as together they produce useful products for people. This
is especially crucial for poor countries where capital is scarce and where for-
eign competition based on superior technology has made domestic industri-
alization almost impossible. Socialist development in China demonstrated
that a less developed country can rely on its own resources and people to
develop its economy. Development based on self-reliance was only possible
with socialist development where the logic of capital no longer dominated."

When state-owned industrial enterprises were phasing out commod-
ity production, it was a fundamental and significant change toward the
direction of communism. In that process each state-owned enterprise was
considered part of the whole, and they were under a unified accounting
system. Therefore, instead of competing with one another, different enter-

5 The Global Commission on the Economy and Climate: https://newclimateecon-
omy. report/2016/wp-content/uploads/sites/4/2014/08/NCE_2016Report.pdf
UN Environment/Emissions Gap Report 2018: http://wedocs.unep.org/bitstream/
handle/20.500.11822/26895/EGR2018_FullReport_EN.pdf?sequence=1 &isAl-
lowed=y Background document to the Global Sustainable Development Report
2019 bya pour of UN-appointed “independent scientists”: https://bios.fi/bios-gov-

ernance_of_ economic_transition.pdf
4 See Question V.

Question II. (A)

prises in a certain industry cooperated with one another. For example, a
technologically advanced steel enterprise helped build a new steel enterprise
by providing it with a plant design, machinery and equipment, and even
technical personnel. Experienced engineers in the old steel plant went to
the newly built plant to consult, and/or engineers in the new plants went to
the more advanced plant for training. Since both the old plant and the new
plant were parts of the same whole, the old plant did not consider the aid
given to the new plant an “expense.” It was through cooperation that indus-
trialization spread in socialist China from the East coast and the Northeast,
where industrialization was more advanced, to the more remote regions in
the North and Northwest. There was actually a catchy phrase to describe this
phenomenon: “An old hen laying eggs all over the places’—meaning, in this
example, that an older steel plant gave birth to dozens of new steel plants. It
demonstrated that cooperation was far superior to competition.

Phasing out labor power as a commodity

During China’s socialist construction labor power was in the process
of being phased out as a commodity, something that could be bought and
sold. This is an equally important characteristic of socialism that is funda-
mentally different from capitalism. The State established an eight-grade wage
scale that it applied nationwide to all workers in state-owned enterprises.
The wage scale was based on worker skills and years of service with some
adjustments for cost-of-living differences in different parts of the country.
Wages of engineers with college degrees were higher. But as time went on
engineers’ wages were lowered if they had received their college education
after 1949 when the State paid for their college education expenses plus
living allowances."

During the socialist construction state-owned enterprises received
wage funds from the State to cover their total wage bill plus the cost of
providing benefits to workers, which included low-rent housing, subsidized
food and utilities, basically free medical care, education and other services.
The transfer of wage funds from the State to workers via the enterprises
removed the responsibility of cadres (in China, referred to as “ganbu,” lit-
erally translated as “backbone personnel”) in charge of the enterprises, to

5 All of the expenses of college education were paid by the State, including tuition,

books, and room and board. Additionally students also received a monthly stipend
for miscellaneous expenses.

From Victory to Defeat

meet wage and benefit payments from the enterprise revenues. Managers in
capitalist countries often lay off workers, reduce work hours, or cut worker
benefits when the enterprise they manage fails to meet profit targets. Ganbu
in state-owned enterprises had no such authority because the State guaran-
teed workers’ jobs by transferring the wage fund to cover wages and benefits.
Transferring the wage fund directly from the State to the workers via the
enterprise was the only way to guarantee permanent employment and the
amount of wages and benefits workers received.

It is important to look at the completely different perspectives on
workers’ wages and benefits in a capitalist society versus a socialist society.
In a capitalist society the goal of production is to maximize profits. Profit
in a capitalist enterprise is dependent on the surplus value extracted from
workers so, therefore, the entire industrial organization is set up for pro-
duction to run “efficiently” to increase workers’ surplus value. Higher wages
and better benefits logically reduce the surplus value and serve as drags on
profits, so they need to be kept as low as possible. On the other hand, in a
socialist society one of the most important goals of production is to improve
people’s material lives. Higher wages and better benefits are the very reasons
to fulfill the purpose of production. In state-owned factories in addition to
managing matters related to production, the cadres (ganbu) in charge of
different departments also had the responsibility to oversee many aspects of
workers’ lives including food, housing, utilities, nurseries and schools (from
kindergarten sometimes all the way to high school), as well as recreation
and organizing political study. Ganbu even served as counselors/social work-
ers to resolve issues among family members and/or co-workers. In other
words, ganbu paid great attention to all aspects of workers’ lives. If a ganbu
neglected this part of his/her responsibility or failed to handle these matters
fairly, he/she would be criticized.

Whether labor power is or is not a commodity is of critical impor-
tance. Marx spent the first volume of Capital explaining how the capitalist
extracts surplus value from workers in the process of production. He ana-
lyzed how surplus value was realized into profits when the product was sold.
Marx explained how, unlike feudal society, exploitation takes place in capi-
talist society during the process of production where the capitalist buys labor
power as a commodity. Therefore, we can only end exploitation by ending
the buying and selling of labor power as a commodity. Whether labor power
is or is not a commodity necessarily dictates how the laborer is treated. In a

Question IT. (A)

capitalist society when labor power is a commodity, the laborer can be hired
and fired at any time. As far as the capitalist is concerned, his only interest is
to buy the labor power when needed and to stop buying it when there is no
longer the need. The capitalist has no concern for the laborer. In contrast,
in socialist China a worker was guaranteed a job and livelihood including
retirement and medical care. In socialist society where labor power ceased to
be acommodity, laborers were treated as the creators of wealth, both for the
factory and for the whole society. This was the most important reason why
workers were so highly respected in socialist China. Nowhere in the world
during any historical period were workers ever accorded such respect and
dignity.

Moreover, when labor power ceased to be a commodity the relation-
ship between workers and machines changed fundamentally. Living labor
commanded the machines (capital that contains dead labor) instead of the
other way around. In the early days of capitalism the Luddites destroyed
machines because they believed that machines were their enemies that could
make their jobs obsolete. On capitalist assembly lines, production workers
cheer when the line breaks down. During socialist construction in China,
machines were not treated as the enemy; workers treated machines as valu-
able tools that helped them in production. Workers were proud when they
mastered skills of how to use machines properly to produce the best prod-
ucts, paying great attention to maintaining machines, many going to check
on the machines on their day off. (Workers lived in industrial complexes
within walking distance to the factories.)

Even though China’s development between 1956 and 1978 was social-
ist, contradictions continued to exist within the industrial sector as well as
between the economic base and the superstructure. When we say the state-
owned industries were phasing out commodity production and phasing out
labor power as a commodity, it did not mean the process of phasing out was
completed. Actually the process to phase out commodity production and
labor power as a commodity takes a very long time. Even so, within a short
period of two decades from 1956 to 1978 we began to see how a socialist
society operated qualitatively differently from a capitalist society. This will be
further explored in the discussion about changes in the superstructure and
the challenges China faced in developing socialism.

From Victory to Defeat

Question II. (B)

How did the relations of production change in the collectively owned
agricultural sector?

Toward the end of Land Reform two opposing views existed within
the Chinese Communist Party on how to develop China’s agriculture. The
debate between these opposing views reflected the fundamental differences
between Mao Zedong and Liu Shaogi (and later Deng Xiaoping) on issues
regarding how to develop a socialist economy. When the means of produc-
tion in the industrial sector were transferred from the private sector to the
State, members of the Chinese Communist Party were basically in agree-
ment even though some members (basically Liu and his followers) thought
the transfer should have proceeded more slowly. However, when it came
to the development of the agricultural sector, the difference between Mao
and Liu was sharp and substantive. As far as Liu was concerned, after Land
Reform and the transfer of the means of production in the industrial sector
to the State, the principal contradiction in China was between the “advanced
social system” (meaning the relations of production) and the “backward
social productive forces,” as clearly expressed in the Resolution of the Eighth
National Congress of the CCP in 1956.'° Therefore, according to Liu (and
later Deng), the main task of the CCP was to devote itself to the develop-
ment of the productive forces. Mao, on the other hand, believed that the
social system (the relations of production and the superstructure) was far
from being advanced, and that contradictions still existed within the eco-
nomic base as well as between the economic base and the superstructure.'”
These philosophical differences between Mao and Liu caused them to view
China’s socialist development from entirely different perspectives.

Mao was a firm believer in Marxist dialectical materialism. He saw
that in the contradiction between the productive forces and the relations of
production, the productive forces are the principal aspect. In the contradic-
tion between theory and practice, practice is the principal aspect; in the con-
tradiction between the economic base and the superstructure, the economic

'© “Resolution of the Eighth National Congress of the Communist Party of China,” Eighth
National Congress of the Communist Party, 16.

'7 Mao Zedong, On the Correct Handling of Contradictions Among the People, Selected
Works of Mao Ise-tung, Vol. V, 394-395.

Question II. (B)

base is the principal aspect. However, Mao also believed that under certain
conditions, such aspects as the relations of production, theory and super-
structure, could come to the fore to play the principal and decisive role. Mao
explained that when people regard these respective positions (productive
forces vs. relations of production, theory vs. practice, and economic base vs.
superstructure) as fixed, instead of changeable in their respective positions,
they hold a mechanical-materialist point of view, not a dialectical-materialist
one. The mechanical-materialist believed that under no circumstances could
the relations of production, theory, or superstructure become the dominant
aspect of the contradiction.

Mao did not hold the mechanical-materialist point of view; he
believed that under certain conditions the productive forces and relations
of production could exchange places and the relations of production could
play the dominant role in making change. For example, when the relations
of production remain unchanged for a long time, the productive forces can
become stagnant and stop developing unless a change in the relations of
production (such as a revolution) occurs. In that case the relations of pro-
duction can play the principal and decisive role.'* Mao further explained
that while it is true that in the contradiction between the superstructure
and economic base the economic base is the principal aspect, under certain
conditions the superstructure can become the principal aspect. During a rev-
olution the relations of production are changed by people actively engaged
in class struggle (political, ideological, and cultural struggle in the sphere of
the superstructure), which can play the leading role in changing the relations
of production. Dialectical-materialism was fundamental to Mao’s analysis of
social change. It played the most important role in constructing his strategy
to win the long revolutionary war and it also played the most important role
in shaping his strategy on political and economic development during the
socialist transition.

In order for feudal ideology to lose its influence, its material base of
feudal land tenure had to be destroyed. However, even when Land Reform
ended the feudal land tenure system, Mao saw that feudal ideology had stay-
ing power; if left unchallenged, it could easily lodge itself in the new eco-
nomic base. Therefore, without careful ideological work to get rid of feudal
ideology, it could prevent the new economic base from taking root. Mao

8 Tbid., p. 336.
31

From Victory to Defeat

regarded Land Reform not just as a way to redistribute land to the peasants,
but also as a social movement to propagate new ideology, one that explained
why exploitation was wrong and that it was unjust for landlords to forcefully
take the product of the peasants’ labor. When the peasants adopted this
new way of thinking they became determined and empowered to right past
wrongs and were energized to complete Land Reform and engage in move-
ments to collectivize agriculture.

Land Reform in the newly liberated areas in China’s countryside from
19491952 gave hundreds of millions of peasants a plot of their own land
for the first time in their lives. Although land holdings averaged only 0.2
hectares per capita, peasants cultivated their newly possessed land with great
enthusiasm. The output of both grain and cotton went up rapidly between
1949 and 1952. By 1953, however, grain production became stagnant and
cotton production decreased."

After one hundred years of destruction from wars and landlord neglect,
China’s natural environment for agriculture was very fragile, and arable
land was scarce and infertile. Agricultural infrastructure such as irrigation
was in total ruin. Before Liberation, natural disasters such as drought and
flood were widespread, and famine was a common occurrence. After Land
Reform was completed in 1953, in addition to owning very small plots of
poor quality land, the majority of peasants, more than 300 million, owned
very few productive tools. Among the poor and lower-middle peasant house-
holds—60 to 70% of China’s peasantry—many did not even own a plow,
let alone other farm tools or draft animals. Without farm tools enthusiasm
alone could not continue to increase production. Moreover, in 1953 and
1954, floods and drought affected large areas of farmland. Individual peas-
ants were defenseless against such natural disasters. Before Liberation, when
natural disasters hit, many peasants were forced to migrate to neighboring
provinces just to survive. After Land Reform, when the health conditions
of almost all peasants were still very poor, families were often devastated by
illness or the death of a family member. Some farm households were also
without any productive labor when their loved ones sacrificed their lives
during the war against Japan and/or the war against the Kuomintang. When
peasant families faced any of these problems they had to borrow money.
Facing debts at usurious interest rates, some peasants were forced to sell their

'° See Su Xing, “The Two Line Struggle, Socialist vs. Capitalist, after the Land Reform,”
Jing Jin Yan Jiu, (Research in Economics)1965, no. 7, p. 24.

Question II. (B)

newly acquired land. Before the cooperative movement began, land sales and
private borrowing had begun to rise, as had the number of peasants who
hired themselves out as farm hands.”°

Thus, although Land Reform resolved the principal contradiction
between peasants and landlords, it could not solve the urgent need to increase
production to improve the majority of peasants’ material conditions. The
new situation proved small-scale subsistence farming was not a stable situa-
tion or a viable solution for agricultural development. The farming situation
in China at that time was very similar to the situation in many colonial and
semi-colonial countries in the world today. It was obvious that agricultural
production had to be modernized and the scale of production increased.
In China after Land Reform the struggle surrounding agricultural develop-
ment intensified. The main struggle was not whether agricultural production
needed to increase in scale and be modernized—the struggle was over how
to achieve it. In other words, mechanization versus collectivization: which
should come first? Mao believed that peasants could be organized to join
their small pieces of land together and share their limited productive tools
to first increase agricultural output and then to make improvements in land
and build infrastructure to prepare the land for mechanization and modern-
ization. Liu Shaogi, on the other hand, believed that after Land Reform fur-
ther changes in the relations of production were unnecessary and all efforts
should be devoted to the development of productive forces. Liu believed that
only when China could produce enough steel and acquire the technology
to manufacture tractors and other agricultural machinery and equipment
would the conditions exist for the modernization of agricultural production.

With a mechanical-materialist perspective, productive forces are
always the dominant aspect in the contradiction between productive forces
and relations of production—the relations of production can never become
the dominant aspect. From that point of view, that relationship is fixed,
which is why Liu insisted that mechanization had to come first. Mao, on
the other hand, believed that further changes in the relations of production,
meaning collectivization, had become the principal aspect of the contradic-
tion and that changing it would help develop productive forces. Mao saw the
energy and the enthusiasm of the Chinese working people as the source for
economic development. He recognized that when peasants were mobilized

20 Tbid.
33

From Victory to Defeat

and their consciousness raised to a higher level, they created the possibility
of organizing production on a scale larger than a single farm-household. He
saw that ideology (in the sphere of superstructure) could play a major role in
changing the relations of production from privately owning and farming a
small piece of land to collectivization.

Mao won the first major debate within the Chinese Communist Party
on how to develop China's agriculture. Collectivization began soon after
Land Reform initially by organizing mutual-aid teams in production and
then elementary co-ops and advanced co-ops, and finally the formation of
communes in 1958.

One of the most challenging problems in China’s agriculture histori-
cally and currently is the lack of arable land. China has less than 9% of the
world’s arable land, but it has to produce food and other agricultural prod-
ucts for 22% of the world’s population. On a per capita land basis, its arable
land is just over one mu or 0.0827 hectares (1 mu = 0.067 ha)—about one
third of the world’s average. At the conclusion of the Chinese Revolutionary
War, Western experts never expected that China would ever be able to feed
its people. With such limited arable land, the only way to increase produc-
tion was through intensive cultivation to increase the yield per cultivated
area. Between 1952 and 1978 China was able to double crop yields per unit
of arable land through the collectivization of agriculture.

Collectivization of agriculture began at the conclusion of Land Reform.
It started with mutual-aid teams. Several (20 or more) peasant households
were organized to share their tools and labor in production. That proved not
to be so difficult because when farm tools and labor were more fully utilized,
output increased and every family benefited.

The next step in agricultural collectivization was the formation of
elementary cooperatives, where peasant households joined their land and
productive tools together in farm production but still retained the owner-
ship of their tools. That ownership entitled peasant households that owned
them to claim shares of output in addition to the shares each household
received according to the amount of the labor they contributed. At this stage
of organizing it became more complicated, because the peasants’ decision
to join or not to join depended on their potential gains. Mao saw that in
order for the co-ops to be on solid ground, peasant participation had to be
on a voluntary basis. The policy of the CCP was to encourage peasants to
join the cooperatives but respect their decision to go it alone. The poor and

Question II. (B)

lower-middle peasants (more than 65-70% of all peasants) who owned a
small plot of land but owned very few farm tools, had little chance to make
it on their own. They were the staunchest supporters of the co-ops. ‘The rich
and some upper-middle peasants who had owned larger plots of land and a
few farm tools could hire workers and increase production, so they opposed
joining the co-ops. The middle peasants took a “wait and see” attitude to see
how the co-ops fared. The co-ops increasing output to win over the middle
peasants was critical to the success of the co-op movement. Eventually the
middle peasants were won over and the rich peasants had no choice but to
join, however reluctantly, because they could no longer hire anyone to work
for them.

Organizing peasants into cooperatives was not an easy task. For
one thing peasants in China had never experienced working cooperatively
together. Peasants did not know what it would be like. When the coopera-
tive movements were spreading throughout the countryside there was great
worry about whether the co-ops could increase production and whether the
increases could be sustained. There were cases, though only a very small
minority, where crop production decreased and organizing efforts failed.
Credit for the co-op movement’s success has to be given to CCP policy to
rely on the poor peasants and to win over the middle peasants. Credit should
also be given to the majority of party cadres who had just finished fighting
the war and knew next to nothing about organizing co-ops. But these cadres
were mostly from the poor peasant families and they keenly understood their
struggles and hopes for a better life. They trusted the Party based on what
they witnessed during the revolutionary war and the land reform it imple-
mented. They worked tirelessly and wholeheartedly to support the Party and
successfully completed the collectivization of agriculture.

After the elementary co-ops the next step was the formation of
advanced co-ops. As William Hinton, well-known author of many books
and articles about China’s land reform and collectivization, pointed out in
Shenfan, when production began to increase after the formation of the ele-
mentary co-ops, it became obvious that most of the increases were due to
more intensive labor rather than the use of farm tools and implements.*! The
majority of team members began to resent the fact that the tool owners con-
tinued to draw larger amounts of the co-op’s rising income. ‘The issue of how

*! William Hinton, Shenfan, The Continuing Revolution in a Chinese Village, Random
House, 1983, 120-121.

From Victory to Defeat

much in dividends should be paid to the owners of productive tools became
more complex and divisive. The solution was to move forward to advanced
cooperatives where the co-ops bought the productive tools from their own-
ers with a onetime payment according to negotiated prices. This was how
co-ops progressed from elementary level to advanced level. As their incomes
increased the advanced cooperatives were able to buy more farm equipment
with funds accumulated from their rising income. From that point on in
China's countryside, income was distributed only according to the amount
of labor each farm worker contributed; farm tools (capital) ceased to claim a
share of the total income.

The collectivization of agriculture was completed in 1958 with the
formation of the communes. The communes had a three tier-ownership
system: communes, production brigades, and production teams. In 1962
production teams consisted of 15 to 30 farm households averaging 24.9
families; production brigades, the size of a village, averaged 7.9 production
teams; communes, the size of a county, averaged 9.4 production brigades.
Each commune administered agricultural (and later industrial) production,
commerce, education, social welfare, and self-defense (with its own militia).
The communes also managed their own finances and were responsible for
collecting and paying taxes to the State, an accumulation fund for invest-
ment (seeds, new farm tools, and/or building infrastructure), and a welfare
fund (medical care, education, care for the elderly and the needy) for all
commune members.”

As the productive forces developed, communes used their accumula-
tion funds to build large-scale irrigation and drainage systems, roads, hos-
pitals, and purchase large agricultural instruments. By the late 1960s rural
industrialization began and communes also owned factories. Production
brigades built and owned factories, large agricultural machinery, milling sta-
tions, animal/poultry farms, sewing stations, and other facilities. Brigade
members shared the use of these facilities.

Production teams owned land and small agricultural instruments.
Each team functioned as a basic accounting unit. Team members elected
their team leader, who was in charge of production and distribution, but
continued to do farm work with other team members. After paying taxes to

2 The commune ens for its members’ medical expenses, so the out-of-pocket

expenses for medical treatment for members were extremely low. Students only paid
for their basic supplies like notebooks and pencils.

Question II. (B)

the State (via the commune) they made payments to the commune for the
accumulation and welfare funds. At harvest time the team distributed quota
grain to its members based on age and the physical intensity of their labor.
Then the rest of its income was distributed to team members according to
the amount of work points each member earned during the year. One day
of labor earned a minimum of about five work points to a maximum of ten,
depending on the physical strength and skills required for the work. Team
members’ attitude toward work, such as willingness to help others, was also
figured in when the worth of one day’s work was assessed. The evaluation
and assessment of work points each person earned for a day of work was
discussed, debated, and determined democratically by all team members.

With the exception of some very poor communes, most people’s lives
in rural China improved dramatically. Each member of the production team
received a quota of grain from his/her production team, even if he/she was
too young, too old, or too sick to work. In addition to food grain, members
received low cost health care and low cost education paid by the commune’s
welfare fund, which also covered major expenses for needy families.” In
addition the State allocated funds to pay for education (teacher salaries and
school construction) in the rural areas, as well as the cost of training teachers
and healthcare personnel who worked in the countryside.

The formation of communes fundamentally transformed the relations
of production in the agricultural sector. This fundamental change in the
relations of production was the main reason for the rapid development of
productive forces in China's agriculture. By joining the land together and
combining their tools, China’s peasants were able to work collectively to
improve the quality of the land and to build agricultural infrastructure.
‘They were able to accumulate more funds to buy more and better tools and
worked extremely hard to improve the fertility of the land. When chemi-
cal fertilizer was not yet available they saved, preserved, transported, and
applied animal and human waste to improve the soil. When peasants were
not busy planning and harvesting, they worked together to prepare the land
for mechanization by joining pieces of land together, flattening the land, fill-
ing in the small creeks, and terracing the land in hilly areas. Large numbers
of peasants were organized to work on land preservation and improvement

°3 The five guarantees for the needy families (including ae who had lost their
ability to work, or the elderly who had no children) were: food, clothing, shelter,
medical, and burial.

From Victory to Defeat

projects. These projects accelerated in the late 1960s and early 1970s when
agricultural production was more stable and more labor could be diverted
from farm work to construction. They also worked on land improvement
and infrastructure construction projects during seasons when agricultural
work was slack. As a result peasants in China extended their active working
days from 119 a year in the 1950s to 250 a year in the 1970s.4

Alexander Eckstein, an expert on Chinese economy, said the following
about the farmland capital construction in his paper on “Zhe Chinese Devel-
opment Model”:

More concretely, it indeed means reshaping the geographical features
of an area to provide the physical conditions necessary for the application
of an appropriate mix of other inputs—labor, machinery, fertilizer, and
improved seed strains—to bring about high and stable yields. This often
requires squaring or terracing the land; at times it involves leveling moun-
tains and transporting the soil manually in baskets for several kilometers
to build a huge dam or to cover some areas with topsoil. In many areas, it
means constructing underground drainage channels, reservoirs, canals, irri-
gation channels, pumping stations, and tube wells.”

In addition to all the fieldwork and capital construction, China’s agri-
culture production organized under the commune also facilitated advance-
ment in agricultural technology. When agricultural development was sta-
bilized in the mid-1960s, rural industrialization began in earnest from the
energy created during the Great Leap Forward. By the mid-1960s, along
with growth in agricultural production, small-scale industries were set up
by production brigades and communes in the countryside. (For details of
achievements in China’s agriculture see Question VI. below.)

*4 Nicholas R. Lardy, Economic Growth and Employment in China, Oxford University
Press, 1979, 7-8.

> Eckstein’s original footnote: “These major construction projects have been under

way for some times. They could be observed during my visit to China in December
. They were given a renewed impetus by the National Conference on Learnin

1972. They gi d imp by the Now | Conf L

from Taichai held in Sie! and October 1975 and were described in some detai

in American Rural Small-Scale Industry Delegation, Rural Small-Scale Industry,” Chap-

ter 5, pp. 2-5 and Chapter 6, p. 7.

Question III.

How did the superstructure change from feudal and capitalist to so-
cialist from 1949 to 1978, and how important was the Cultural Revo-
lution to this change?

Since exploitation exists both in feudal and capitalist society, there has
to be a political structure that supports the exploitation and a correspond-
ing cultural and value system that justifies it. China had a very long history
of feudalism and thus feudal ideology ran deep, dominating how people
thought and behaved. Even today remnants of feudal ideology remain. The
1949 revolution turned Chinese society upside down and shook feudal ide-
ology to its core. Land Reform followed by the collectivization of agriculture
not only destroyed the feudal economic base, it also fundamentally chal-
lenged the feudal ideology that justified a very privileged few forcibly taking
the fruits of other people’s labor. It also challenged the oppressive patriarchal
feudal culture, which rigidly assigned each person's place in society accord-
ing to a pre-determined order.

As stated in Question II. (A), as the State took over the industrial
enterprises, it aimed to change the relations of production by phasing out
commodity production and labor power as a commodity. Workers in state
enterprises received wages and benefits directly from the State. While indus-
trial workers in capitalist countries had to fight hard for the eight-hour work-
day and for any increase in wages and improvement in working conditions,
workers in state enterprises received them right away from the new govern-
ment. In a society with such a long feudal past, the relationship between the
workers and the Communist Party of China could not help but still have
remnants of feudal ideology. Since workers in state enterprises all received
the above-mentioned rights and benefits they, like other recipients of benev-
olent endowments, were relatively content and passive. They were grateful to
the Party and State for what they received and believed that working hard to
build their country was in part a way to show their gratitude. This was espe-
cially true for older workers who could compare the incredible differences
between factory work before and after Liberation. Worker gratitude towards
the Party and State extended to the cadres in charge of factory management,
the overwhelming majority of whom, especially those at the higher levels,
were communist party members.

From Victory to Defeat

Revolutionizing Industrial Organization

As stated earlier, one of the basic changes in the relations of produc-
tion in state-owned industrial enterprises to phase out labor power as a com-
modity would not have been possible had there not been a fundamental
change in relationship between the cadres and the workers in the factories.
Throughout China’s long history of feudalism, government officials always
had absolute authority. This old and outdated ideology had staying power in
the new society and could be easily manipulated by authority to reassert con-
trol. After the transfer of ownership the cadres, who represented the State,
had a lot of power and authority, and workers often did not question or chal-
lenge them. The new cadres were certainly different from the old managers
before Liberation; they, in many ways, went out of their way to look after
the workers’ interests. However, despite the fact that workers (like peasants
and other sectors of the masses) participated in the mass movements led
by the Communist Party of China during the 1950s and early 1960s, their
class-consciousness was not fully developed. Workers were not aware that
changes in the relations of production were not guaranteed after the judicial
transfer of ownership to the State, nor were they aware that political struggle
continued at the highest levels within the Party—the outcome of which
would determine the direction of the transition. Although it is true that even
before the Cultural Revolution democracy in the workplace went far beyond
that of factories in West because permanent employment status guaranteed
workers their place in the factories, before the Cultural Revolution, workers
did not seriously question or challenge the cadres’ authority in the factories.

As industrial production increased and the number of industrial
workers rose in the 1950s, work rules and production processes in factories
became more rigid. The division of labor within the factories reflected the
social division of labor in society as a whole. Graduates from universities
and technical schools designed the products, developed the technology, and
determined the labor process. Cadres managed the shops and made most
decisions, which were seldom challenged by the workers. Mao saw that if
this were to continue, a hierarchy of power would gradually take hold, pre-
venting the production workers from eventually taking charge of running
the factories. If workers could not be in charge of the factories how could
they be expected to be in charge of the State?

When workers of the Anshan Metallurgical Combine initiated changes

Question III.

in the operation of their workplace in 1960, Mao took the opportunity to
call on all factories to follow their new rules as guidelines for the operation of
state enterprises. On March 22, 1960, he named these new rules the Angang
Constitution. (Angang is the abbreviation for Anshang Steel and Iron.)

The Angang Constitution consisted of five principles: (1) Put politics
in command; (2) Strengthen party leadership; (3) Launch vigorous mass
movements; (4) Systematically promote the participation of cadres in pro-
duction labor and of workers in management, and (5) Reform any unrea-
sonable rules and assure close cooperation among workers, cadres, and tech-
nicians, and energetically promote technical innovation.

Before the Cultural Revolution these guidelines did not receive enthu-
siastic support from the workers. While workers enjoyed benefits endowed
by the State, they did not see the two-line struggle being waged within
the Party. As Mao advocated for more worker control in the state facto-
ries, Liu Shaoqi advocated for Labor Reform to take away their permanent
employment status. As early as the 1950s Liu Shaoqi began advocating for
the labor-contract system. An essay from the recently published Labor Con-
tract System Handbook reveals the history of Liu’s attempts to institute tem-
porary contract workers in state-owned factories. The essay describes how,
in 1956, Liu sent a team to the Soviet Union to study their labor system.
Upon its return the team proposed the adoption of the labor-contract sys-
tem modeled after the Soviet Union. However, when the changes were about
to take place, the Great Leap Forward began, thus interrupting this model’s
implementation. Then in the early 1960s, Liu again attempted to change
permanent employment status by adopting a “two-track system”; enter-
prises would employ more temporary and fewer permanent workers, and
the mines would employ peasants as temporary workers. Then in 1965, the
State Council announced a new regulation on the employment of tempo-
rary workers, indicating that instead of permanent workers, more temporary
workers should be hired. The regulation also gave individual enterprises the
authority to use allocated wage funds to replace permanent workers with
temporary workers. This time the Cultural Revolution interrupted Liu’s
effort to reform the labor system, and in 1971 large numbers of temporary
workers were given permanent status.”°

After the Cultural Revolution began in 1966, and China’s population

°6 “The History of Our Contract Labor System,” Labor Contract System Handbook, ed.
Liu Chiang-tan, (Science Publisher, 1987): 1-18.

From Victory to Defeat

engaged in changing society, the principles of Angang were broadly propa-
gated, widely discussed, and actually put into practice. To this day principles
in the Angang Constitution are still some of the most radical guidelines
to changing industrial organization and production processes in facto-
ries.”” During the Cultural Revolution other important issues were debated,
including material incentives and piece-wage rates. Through discussion and
debate workers saw that using material incentive to induce competition
among workers only divided the workers and damaged class unity. When
factory rules and regulations were openly discussed and debated, workers
realized more than ever that it was up to them to change the world they lived
in. That high degree of industrial democracy was what Charles Bettelheim
witnessed in China’s factories when he visited there in 1971. From what he
observed in the factories and in society, Bettelheim wrote in the preface of
his book: “Through discussions and struggles involving millions of workers
and vast sections of the population, a new road was opened up in the strug-

gle for socialism.””*

Reforming the Education System

Revolutionizing industrial organization in factories was one import-
ant accomplishment of the Cultural Revolution. Reforming the education
system was another. During the long history of feudalism, education was
reserved for the very privileged few. A system of examinations evolved from
this long history, designed as a way to select a few “qualified” intellectuals
to join the ruling class. Landlord families paid tutors to educate their sons.
‘The sons had to study hard and then take the difficult examination; if they
passed, they could become officials serving in the imperial government. This
system of selection was how the land-owning class linked to the ruling class.
Education, as an avenue to advance in social stature, had deep roots in the
thousands of years of feudalism and in the consciousness of ordinary people.
‘The divide between mental work and physical work was similarly rooted. As
Mencius famously said: “Those who work with their brain rule, and those
who work with their muscles are ruled.”

Modern Western-style education found its way into China in the

7 A small group of people organized a commemoration of the 50" anniversary of the
Angang Constitution in Beijing in March 2010.

*8 Charles Bettelheim, Cultural Revolution and Industrial Organization in China,
Monthly Review Press, 1974.

Question III.

mid-1880s through missionary schools and later through returning students
educated in the United States and other Western countries. Toward the end
of the Qing Dynasty the first university was established and the examination
system was abolished. After the 1911 revolution the government adopted
many aspects of modern education from the West, including the levels of
education and the number of years at each level: six years of elementary,
three years of junior high, three years of high school, and four years of col-
lege. Curriculum at different levels was changed to include modern science,
modern languages, social sciences, psychology, and other subjects. In the
1930s, however, only about 15% of Chinese children received elementary
level education and even fewer attended high school. University education
only served the extremely small ruling class in the urban areas and provided
an important vehicle for obtaining wealth, fame and power.

When the People’s Republic was established in 1949 the literacy rate
was about 20%.” The focus of education in the early years of the new gov-
ernment was to quickly increase the population’s literacy through formal
schooling, as well as through literacy campaigns and establishing informal
schools that taught people how to read and write. Between 1949 and 1965
elementary school enrollment more than tripled from 45 million to 160
million, secondary school enrollment increased 8.5 times from 2.3 million
to 19.7 million, and college enrollment increased 4.3 times from 230,000
to 930,000.” Curriculum at different levels went through major revisions;
Western influence was largely replaced by Soviet influence. Education in
urban areas was basically free of charge. College students no longer had
to pay tuition and were also given monthly stipends to cover their living
expenses. In this sense, education was no longer limited to those who could
afford to pay and was expanded to include young people from other seg-
ments of society.

The basic philosophy of education, however, remained largely
unchanged and continued to follow in the old tradition. Although schools
expanded at all levels during the first 16 years of the new republic, there
was a strong bias in favor of the urban population at the expense of the
2% The criteria of literacy varied from knowing 1,500 Chinese characters to know-
ing over 3,000 or more characters. For more details, see Dwight Perkins and Sjajid

Yusuf, Rural Development in China, The John Hopkins University Press, 1984, chap-
ter 8.

°° State Statistical Bureau, Statistical Yearbook of China, 1981 (Hong Kong Economic
Information Agency, 1982)

From Victory to Defeat

rural. Even in urban areas, children of worker families were at a disadvan-
tage, although cost was no longer a barrier for them to attend school. In the
1950s and 1960s, schools at different levels used test scores to judge student
performances, and admission to high school and college was based on the
entrance examination scores. “Key schools” were set up to attract students
with the best scores and a tracking system within them—very much like the
tracking system in US schools—further differentiated their futures; place-
ment in the upper tracks of “key high schools” almost guaranteed a place in
the best universities by enabling them to achieve high scores on the entrance
examination. The “key schools” had more resources, better trained teachers,
and better facilities.*! This system of competition based on book learning
strongly favored students from intellectual families, which had more books
and parents who were better equipped to help their kids raise their exam
scores. While children from worker families were at a disadvantage, children
of peasant families had even more limited chances to attend high school; all
the barriers to enter university were almost insurmountable. Both feudalism
and capitalism use the surplus created by workers and peasants to educate
elites who turn around to rule them. If socialism continued that familiar
pattern, where would future leaders of the working class come from?

‘The admissions process and standards no longer met the needs of the
new society, and neither did the curriculum. There was too much book learn-
ing, which often imparted outdated and irrelevant knowledge that did not
meet the urgent needs of China’s rapid industrial and agricultural develop-
ment. Even though Mao was well versed in the ancient forms of the Chinese
language, he always thought education in its traditional form stifled young
people’s curiosity and imagination and provided no useful knowledge. He
had dropped out of school a few times in his youth and studied on his
own to acquire a wealth of knowledge in breadth and depth unmatched by
known scholars. Thus Mao had a bias against the kind of formal education
taught in regular institutions and saw education reform as a key to the suc-
cess of building a new socialist society—not only so that young people could
acquire useful knowledge for developing the economy, but also to bridge
the divide between mental and physical work. However, in the institutes of
higher learning, school administrations and faculties considered curriculum
matters their prerogative—a role that was not to be challenged by anyone.

31 Perkins and Yusuf, Ibid.
44

Question III.

During the Cultural Revolution several basic questions confronted
education reform. First, who should be admitted to schools of higher learn-
ing? Second, what should be taught in these schools and how should book
learning be connected to practice? And third, how could education be
expanded to include more young people in the countryside? There was also
the question of learning beyond classrooms and whether the length of for-
mal education at different levels should be shortened.

Education reform generated great enthusiasm among young Red
Guards during the Cultural Revolution. Schools were suspended so that the
young people could play a critical role in changing the education system.**
Education reform provoked an uproar in institutions of higher learning.
After three years of intense struggle, admission processes and standards
were changed and written entrance examinations were abolished. After high
school graduation, young people worked in either factories or on farms, and
their work units decided who should be sent to school for further study.
Additionally, large numbers of high school graduates in cities were sent to
the countryside to learn how to work and learn from working in produc-
tion. Curriculums were revised to better fit the needs of society. Physical
labor was incorporated into the curriculum as an integral part of learning.
University faculty in science and engineering started going to factories to see
how to make a better connection between what they were teaching and what
was needed for industrial development, while faculty in agricultural sciences
went to the communes to help peasants improve planting methods and soil
conditions, develop new seeds, and control pests.

Despite the continuous lies told by the capitalist reformers about
the “ten year loss” in China’s higher education, there were very significant
achievements in both science and technology. These achievements laid the
foundation for further development in the post-socialist years. More impor-
tantly, education reform during the Cultural Revolution disseminated scien-
tific knowledge to the broad masses of people—the workers and the peas-
ants.

The American Rural Small-Scale Industry Delegation that visited Chi-
na’s small-scale rural industries in 1972 witnessed the confidence and pride
of the peasant-workers who mastered the technology of machine making in
their workshops. In Chapter X: "Expanding Knowledge and Attitude," the

2 Schools were suspended for three years from 1966 to 1968.
45

From Victory to Defeat

delegation report included the following, about the meaning of being “red
and expert”:

[In the stereotype] the experts want large-scale urban enterpris-
es, full of the most advanced technology and imported machin-
ery. The perfect “red” is, of course, the antithesis of this: one
with the masses, confident in their ability and their methods,
unintimidated by the presumed superiority of the technological
mandarins and their foreign mentors...

Central to the resolution of this contradiction is technological assim-
ilation and accessibility: technologies which are felt to belong naturally to
one’s immediate environment, not as wonderful and exotic phenomena; and
technologies which are capable of being thoroughly understood and mas-
tered by those at all levels who work with them. “Most of the machinery in
this plant was made and installed by ourselves.” “Our own staff, in teams
made up of old workers, cadres, and technicians, has produced 104 innova-
tions in the past six months.” Such phrases, which we heard over and over
again, bespeak an important role in assimilation and accessibility for local
small-scale industry.*

What this delegation witnessed in the workshops of rural small indus-
tries speaks to the essence of education reform during the Cultural Revolu-
tion and its short-lived success.

Propagating Proletarian Art and Culture

Related to education reform, changes were made in the areas of art
and culture, including literature, music, film, and theater. Before the Cul-
tural Revolution, mainstream theater and art rarely reflected the lives and
work of workers and peasants. Traditional Chinese opera continued to tell
the stories of old imperial dynasties, which had little relevance to the new
society; a familiar subject of traditional Chinese brush paintings was an old
man sitting idly in a boat appreciating the mystic mountains, as well as
brush paintings of flowers and birds. It was obvious that basic changes in
arts and culture were necessary when workers, peasants, and revolution-

33 “The American Rural Small-scale Industry Delegation,” edited by ee Perkins,
Rural Small Industry in the Peoples Republic of China, University of California Press,
1977, 237-238.

Question III.

ary soldiers were the main actors in the new society. Drastic changes in all
areas of art and culture took place during the Cultural Revolution. A new
breed of worker and peasant artists painted vivid pictures of their lives—
proudly working with shiny new machines in factories and happily working
in the fields with families during the harvest. The joy in these paintings was
expressed in bold strokes and bright colors in contrast to the old paintings of
the lonely old man created with a delicate stroke and muted colors.

Many people today know about the eight famous Cultural Revolu-
tion dramas portraying revolutionary heroes and heroines. Jiang Qing was
responsible for the creation of these dramas on stage and in films, creatively
applying traditional and contemporary art forms including Chinese opera
and Western ballet to tell revolutionary stories. There were also many differ-
ent forms of music explored and developed during this period. One of the
most inspiring endeavors was encouraging music and art students to travel to
national minority areas to record their music and art. The Chinese Commu-
nist Party was very critical of the persistence of Han chauvinism. Since the
great majority of dozens of Chinese ethnic groups were (are) Han, with few
exceptions, historically the Han dominated China politically, economically
and culturally. The CCP made friends with many national minorities during
the Long March and after Liberation its policy toward national minorities
was the most advanced in the world. After Liberation national minorities
were given many political and economic privileges that the Han did not
have. During the Cultural Revolution many efforts were made to preserve
languages, arts, music, and other cultural aspects of national minorities. The
CCP’s policies toward national minorities were the reason for peace between
the Han and other minorities during the socialist period.**

Promoting Democracy, the Spirit of Cooperation and Class Unity

Another crucial achievement of the Cultural Revolution was the prac-
tice of democracy at the grassroots level. The mere suggestion of democracy
under socialism in China can cause controversy. Many people ask, “How
could China have democracy, when it was under the one-party rule of the
Communist Party?” If examined from a different perspective, however, a

4 Through the long history of China, the ethnic majority Han Chinese oppressed
national minorities. After Liberation, the central government deliberately compen-
sated China’s national minorities, setting strict regulations to prevent the Han from
their previous unfair practices.

From Victory to Defeat

different picture with different questions emerges. As explained above, there
were actually two headquarters within the Chinese Communist Party—
the bourgeois headquarters that was actively pursuing capitalism, and the
proletarian headquarters that was actively pursuing socialism. The division
between the two headquarters became clearer after the 1950s. As time went
on the struggle between them became more intense, when Mao saw that the
contradictions could no longer be dealt with as contradictions among the
people.

The dichotomy between the two headquarters could not be resolved
by a voting system like the bourgeois democracy of modern capitalism,
which has a two-party or multi-party system with one or more Left-of-center
parties and one or more Right-of-center parties. The differences between or
among these political parties in the West are very limited in scope, because
all of them have the goal of maintaining bourgeois rule. Some advocate more
government involvement in managing the domestic economy and others
prefer less, but their class interests are the same. Moreover, the range of for-
eign policy alternatives is rather narrow, focusing mostly on options of the
ruling class in imperialist countries.

During the Cultural Revolution the issues between the two head-
quarters were fundamental: between capitalism and socialism. The prole-
tarian headquarters was for socialism and was not afraid of the masses—it
encouraged their participation in the debate. A ruling party encouraging
mass participation in discussing such fundamental issues was historically
unprecedented. During the Cultural Revolution the masses practiced the
four da’s: damin (big voice), dafang (big openness), dabianlun (big debate),
and dazibao (big-character posters) to exercise grassroots democracy. The
government could not censor what people wanted to say, because they sim-
ply wrote big-character posters and pasted them on walls in the streets or
hung them from ceilings in factories, schools or offices. The right for people
to practice the four da’s as well as the workers’ right to strike were writ-
ten into the constitution in 1975 (Articles 13 and 28). This demonstrated
how the proletarian headquarters stood firmly on the side of the workers
and masses. These same rights were quickly eliminated in 1978 as soon as
the capitalist reformers seized power, and they were all formally dropped
from the constitution in 1982. This shows how the bourgeois headquarters
was afraid of the workers and masses by immediately eliminating their basic
rights immediately after it seized power.

Question III.

The Cultural Revolution not only articulated the major differences
between socialism and capitalism, it took concrete steps in advancing social-
ism in many spheres in Chinese society, demonstrating why the proletariat
had to be in control in order to advance socialism. When the bourgeoi-
sie seized power in 1977 it was able to reverse the course of development
and dismantle the achievements made during the socialist period. It also
distorted that period of history—especially the Cultural Revolution—and
demonized Mao. However, the Cultural Revolution made it impossible in
the long run for the bourgeoisie to keep up appearances that they were actu-
ally pursuing socialism. Chinese workers and peasants lived and struggled
through socialism and capitalism as two distinctively different societies, and
their struggles during the past 40 years of capitalist reform have enabled
them to have a better and deeper understanding of the meaning of the two-
line struggle in many spheres of society and the crucial issues hotly debated
during the Cultural Revolution.

Toward the end of the Cultural Revolution the spirit of Dazhai and
Daqing swept across the country. Under Chen Yonggui’s leadership, peasants
in Dazhai worked long hours without rest in bitter weather, overcoming
severe natural conditions to become self-reliant. They proved that men and
women working together could move mountains. Their spirit inspired the
whole country, and in the 1970s as many as 80 million peasants participated
in “farmland capital construction” work each year, totaling the equivalent of
eight billion labor days in land work. As a result, Chinese peasants changed
the landscape of China’s countryside. They also worked cooperatively in
conducting extensive and intensive scientific experiments to improve seed
strains, soil conditions, and other farming methods.

In Daqing, when workers realized that oil was an important source of
energy in China’s industrialization, they devoted themselves to making inno-
vations in order to increase oil production, many risking their lives drilling
oil wells. Workers and peasants in China proved to themselves and to the
world their capability to organize production and look beyond their own
narrow self-interest. What they accomplished should have forever dispelled
the myth that “Chinese people were nothing but a pile of loose sand” and
that “workers and peasants were stupid, ignorant, and backward.” Yet Deng
and his supporters insulted them by calling them lazy, because they “ate from
a big pot,” and because they were “holding an iron rice bowl”—in reference
to the guaranteed economic benefits for the masses in the socialist economy.

From Victory to Defeat

‘The concrete experiences of China showed that socialist value has to
be grounded in the socialist economic base. Question II. (A) and II. (B)
explained changes in the economic base and this question explained changes
in the superstructure. Fundamental changes in both the economic base and
the superstructure made China a socialist country during the period between

1956 and 1978.

Question IV.

What were some additional achievements made during China’s social-
ist development?

China achieved significant development in productive forces in all
sectors of the economy. By relying on its own internal finances and indepen-
dent technological advances, China was able to develop rapidly during the
thirty years before 1978. (See Question V.) China’s socialist development
built a strong industrial base and laid the foundation for its agriculture,
vastly improving the material well-being of hundreds of millions of Chinese
people. It was able to develop sophisticated technology in its industrial sec-
tor and raise the level of mechanization in its agricultural sector. Between
1952 and 1978 the annual growth rate for agriculture, industry, and trans-
port and construction averaged 3.4%, 9.4% and 10.7% respectively.

Achievements in Education and Health

Before Liberation China was an extremely poor and backward coun-
try. After 100 years of repeated foreign invasions and wars China’s economy
was in ruins. Before 1949, malnutrition and outbreaks of infectious disease
were the main reasons for China’s high death rate. During the 1930s China’s
crude death rate was 27 per 1,000. The infant mortality rate was 156 per
1,000 births for the country as a whole and was as high as 200 per 1,000 for
the peasant population. On average, one third of all children died before the
age of five. For the peasant population, life expectancy at birth was less than
30 years.*’ These grim statistics are not surprising, considering that in 1949
only one hospital bed existed for every 24,000 rural residents, and there was
no preventive medicine to speak of.*° China was known worldwide as the
“sick man of Asia.”

After the collectivization of agriculture, grain and other agricultural
products increased steadily, with the exception of 1959-1961. While people's
diet improved, China made rapid progress in other areas to improve people’s
health. Infectious diseases were eradicated by relying on the masses. Mobile

35 Perkins and Yusuf, 133-134.
36 Important Statistics on China’s Agriculture, Chinese Statistics Bureau, 1983, 13 &

From Victory to Defeat

medical units toured the countryside and the cities explaining the causes
of diseases and convinced people to change their sanitary conditions and
personal hygiene practices in order to prevent them. Many mass campaigns
were initiated to eradicate different diseases, along with mass campaigns to
kill flies, mosquitoes, and other carriers of disease. People’s enthusiastic par-
ticipation in these campaigns showed that they wanted to take charge of
changing their own conditions. In only one and a half decades after the Lib-
eration, China was able to eradicate most of the infectious diseases that had
plagued its population for centuries, including cholera, diphtheria, tubercu-
losis, schistosomiasis (snail fever), typhoid fever, smallpox, and many others.

By the end of the 1970s even the World Bank reported that, despite
China’s low per capita GNP, its death rate had dropped to the level of devel-
oped countries. China’s crude death dropped from 27 per 1,000 in the
1930s, to six per 1,000 in 1979, and during the same period its infant mor-
tality rate dropped from 156 per 1,000 births to 56. Life expectancy at birth
doubled within one generation.*’ In the 1940s about 80% of the Chinese
population was illiterate. The Chinese Communist Party launched a liter-
acy campaign in the Liberated Areas even before 1949. After Liberation the
campaign proceeded at full speed. In the meantime, the number of schools
expanded rapidly and by the mid-1960s about 70% of all primary school-
aged children and 16% in the secondary school-aged group were enrolled
in schools.** China’s accomplishment in health and education far exceeded
advanced capitalist countries in their early stage of industrialization because
China’s socialist development made satisfying human needs, instead of
expanded capital accumulation, the goal of its development.

Achievements in the Modernization of Agricultural Production (Social-
ist Approach to Developing Science and Technology)

After the commune system was established, the communes and bri-
gades set up as many as 40,000 agricultural technological expansion and
improvement stations with the help of the central government.” A four-
level research network (county, commune, brigade, and team) covered the
breadth of rural areas, greatly raising the level of technology for agricultural

37 Perkins and Yusuf, 125-127;133-134; and Sidel & Sidel, 92-93.
38 Sidel and Sidel, Ibid.

» ‘These stations operated at the county, the commune, the brigade and the team
levels.

Question IV.

production by improving seed strains, controlling plant diseases and the use
of both organic and chemical fertilizers to improve soil conditions towards
increased production.*” According to Thomas B. Wiens, an agricultural
specialist, China’s work on hybridization in the early 1950s achieved great
results in new dwarf rice varieties and hybrid maize. Wiens explained how
the seed selecting system of this research network was able to achieve the
period from breeding to full-scale production in the shortest time possible.*!
This demonstrated the superiority of having a network structure under the
commune over commercial for-profit seed companies to improve agricul-
tural technology.

The Great Leap Forward in 1958-59 aroused peasant enthusiasm to
industrialize the countryside. By the mid-1960s, when agricultural produc-
tion was stabilized, small-scale industries were set up by production bri-
gades and communes. These small industries produced tractors and other
agricultural machinery and provided repair and maintenance services for
increasingly mechanized agricultural production. They also produced other
industrial goods such as fertilizer for farming and cement for construction,
as well as consumer goods for rural residents. In 1975 Dwight Perkins, a
specialist in international development and in Chinese studies, led a group
of American delegates in different fields of study to visit small industries
in China. They produced a comprehensive report on what they saw called
Rural Small-Scale Industry in the Peoples Republic of China.” Their report
gave a positive evaluation of the concrete conditions of these small-scale
industries (which employed from under 50 workers to around 600 workers)
and their impact. In the conclusion the group credited these small-scale rural
industries that produced cement, fertilizer, electric power, and agricultural

“© Wiens, Thomas B., “Zhe Evolution of Policies and Capabilities in China's Agricultural
Technology,” Chinese Economy Post-Mao, A ee Monae of ae submitted to the
Joint Economic Committee Congress of the United States, Volume 1. Policy and
Performance, November 9, 1979, 671-703.

41 Wiens said, “The extraordinary speed with which hybrid rice went from breeding
to full-scale production is the most spectacular example yet of a facility which gives
China several years’ edge over other countries in the rapidity with which plant breed-
ing results can be app ied.” He continued, “Through the creation of the four-level
research network, China has evolved a system permitting simultaneous stabilization,
selection for local adaptability, evaluation, and seed multiplication in the shortest
possible time.”

® Perkins, Dwight, ed. Rural Small-Scale Industry in the Peoples Republic of China,
1977, 56-58. 110-116.

From Victory to Defeat

machinery with the rapid increase in the rates of investment and transfor-
mation of Chinese agriculture. The report also credited the small-scale rural
industries with raising the level of technical know-how in China’s country-
side. Additionally the small-scale rural industries limited the pace of urban-
ization and facilitated “the desire to reduce the social and economic status
difference between urban and rural, industrial and agricultural sectors; the
desire for greater popular participation and initiatives in the development
process; and the desire to spread technical capabilities throughout the rural
population.”* As a rule they did not use the most advanced technology, but
they served the increasingly modernized agricultural sector well by using
the level of technology available to them—often machinery and equipment
phased out by industries in the state sector.

The economic policies based on the worker-peasant alliance strength-
ened the link between the industrial and agricultural sector. As the industrial
sector developed, it supplied the agricultural sector with more and more
industrial products, agricultural machinery, equipment, electric genera-
tors, and chemical fertilizer. The three-tiered ownership of the commune
mobilized and organized peasants to engage in extensive work to improve
the land and infrastructure in China’s vast countryside. This extensive land
work made the modernization of agriculture possible. Moreover, the small
industries in rural areas made it possible to maintain and sustain the new
modernized agriculture. These accomplishments can be summarized in the
table below:

® bid.
54

Modernization of Agriculture

Question IV.

1952 1957 1965 1979
Tractor-plowed area as a per- 0.1 a 15.0 42.4
centage of cultivated area
Irrigation area as a percentage 18.5 24.4 31.9 45.2
of cultivated area
Power irrigated as a percent-
age of the total irrigated area be a4 aie ae
Kilos of chemical fertilizer 0.7 33 18.7 109.2
applied per hectare
i aaa stations in 98 544 oe 83,224
Generating capacity in thou-
sands of kilowatts : ot ees 2702
Total horsepower of agricul-
tural machinery (10,000 hp) 23 i 1s ni ale
Large and medium-size trac-
tors (in thousands) fe Wed ES ge
Small and walking tractors*
Gathouende) na. na. 4 1,671
Motors for agricultural drain-
age Ac tention (10,000 i) 12.8 56.4 907.4 PollYPoll
Combine harvesters 284 1,789 6,704 26,265
Motor fishing boats n.a. 1,485 7,789 S225)

*Although these were intended for agricultural use, many were used for transporting

goods.

Source: Statistical Year Book of China, 1983, pp. 186, 197; and 1981 China Economic

Yearbook, VI (in Chinese), p. 13.

China’s socialist development was an astounding success. In merely

twenty years Chinese workers, peasants, and intellectuals under party leader-

ship not only built a solid foundation for China’s industries and agriculture

and paved the way for further development, they also immensely improved

the standard of living for a large and growing population. For the first time

From Victory to Defeat

in China’s long history the working people had their basic needs—food,
clean water, healthcare, education, and adequate housing—met and were
credited with being the creators of wealth. They received the highest respect
and dignity in the history of humankind. Again, how can anyone say that
socialism in China failed?

The Great Leap Forward for Women—Holding Up Half the Sky

Under party leadership, Chinas workers and peasants together
changed the world around them, turned the old feudal order on its head.
In the process they also transformed themselves and their relationship with
nature and with one another, including gender relationships between men
and women. Moreover, the CCP consciously and consistently pushed poli-
cies and sustained efforts aimed at equality between women and men. ‘This
was based on the firm belief that a society could not be liberated from the
shackles of old ideas and old practices without the liberation of women. In
other words, in a new socialist society, women’s emancipation must proceed
together with continuing class struggle for full emancipation from all forms
of oppression.

‘The massive campaign to eradicate illiteracy meant setting up classes
in the countryside and cities and teaching ordinary peasants and workers
to read and write. These literacy classes were especially instrumental to the
liberation of women because, once women learned to read and write, they
started reading newspapers, documents, and other printed matter, sharing
information among themselves and communicating with the outside world.
Their surroundings expanded from a narrow focus on their own families to a
broader perspective that included their communities, the nation as a whole
and even the world. Classes organized to eradicate illiteracy later evolved
into political study groups, where they learned and discussed national and
international news and debated government policies.

As described above, the health of people improved dramatically from a
better diet, health care, and personal hygiene. This benefitted the population
in general and women in particular, because women had suffered dispropor-
tionally from health issues due to diseases related to childbirth and had been
the caretakers for sick family members.

In the 1950s, as China’s industrialization took off and factories in
both heavy and light industries sprouted up, both male and female industrial

Question IV.

workers grew in number, and their status rose. In urban areas where most
factories were state-owned, both male and female workers received adequate
wages, equal pay for equal work, and lifelong job and benefit guarantees
from the State. Although wages of factory workers were not high, their cost
of living was kept low due to housing and utilities subsidies and free medical
care for workers with a small monthly payment to cover their families. The
workplace also provided free childcare. Moreover, women workers received
additional benefits including being assigned lighter work during pregnancy,
56 days paid maternity leave, and longer breaks for new mothers to nurse
their newborns in nearby nurseries. Workers also had the option to eat in the
factory canteens, which only charged for the cost of food but not the cost of
meal preparations, liberating women from the domestic work in their kitch-
ens. Women workers retired at the age of 50 and men retired at the age of 55
with pensions that equaled 70% of their wages plus full benefits.

After Land Reform, the collectivization of agriculture in the mid-
1950s was another important step forward in raising the status of women.
During the stage of advanced cooperatives, all land and other productive
tools were collectively owned by the cooperatives. Individual households no
longer had control over the means of production. At the same time, women
began to earn work points from participating in production. As a result,
the material base for patriarchy (male domination), a persistent legacy of
many centuries of feudalism, gradually disappeared. After the communes
were formed, work points women earned were recorded in their own names
instead of the names of their families. This meant that women were treated
as individual workers in the production teams and they—not their fam-
ilies—received the cash or grain they earned from the accumulated work
points. That was the first time peasant women could show the worth of their
productive work. With the cash and grain they took home, their status in
their families rose almost immediately.

During the stage of elementary co-op in Xigou, a small village in
Shanxi Province, a woman co-op leader, Shen Jilan, found a way to moti-
vate women in the village to join production. Shen saw the importance of
women in the drive to increase production; because in Xigou there were
22 male productive members and 24 potential female productive mem-
bers. Female members were reluctant to join production because the work
points they earned had been recorded in their husbands’ names. Shen per-
suaded them to join production by making a change so the work points they

From Victory to Defeat

earned would be recorded in their own names. Soon they joined and formed
an all-women team. These women showed tremendous enthusiasm and
produced impressive amounts of output. Later Shen persuaded the party
leader to send the women’s team to learn new skills. Upon their return, the
all-women’s team produced as much output as the men’s team. Shen then
led them to struggle for equal pay for equal work and won. They became
the first to receive the same number of work points for a day’s work as that
of men.“ Not many women received the same work points as men because
more points were given to a day’s work that required heavier physical labor
traditionally assigned to men. However, gradually, when machines began
to replace human labor, the required physical strength to perform different
tasks became less important, thus helping narrow the gap in work points
between men and women.

“4 See “The age et Status of Chinese Peasant Women,” Addendum to Chapter XII,

Pao-yu Ching, Revolution and Counterrevolution, Chinas Continuing Class Struggle
Since Liberation, Institute of Political Economy, Manila, 2012, 251-260.

Question V.

What was China’s socialist development strategy? How was China’s
socialist development different from colonial and semi-colonial coun-
tries pursuing capitalist development?

When compared with the experiences of countless other colonial and
semi-colonial countries, socialist China was able to successfully develop its
economy where others failed. The most important reason for China’s suc-
cess was that it went through a socialist revolution and pursued socialist
development under the leadership of the Chinese Communist Party. China’s
socialist development made it possible for it to be independent from the
interference and exploitation of imperialist countries. The CCP under Mao
Zedong built a strong alliance between workers and peasants and adopted a
self-reliant development strategy based on this alliance.

Today in most colonial and semi-colonial countries, agriculture can no
longer sustain the rural population, so peasants leave the land and migrate
to nearby cities. In cities independent industrialization has failed and export
manufacturing provides some low-wage jobs, but unemployment and pov-
erty persist in most countries. Peasants who migrate from the countryside
often live in deplorable conditions with no clean water, basic food, or medi-
cal care and extremely poor sanitary conditions. Children living in the slums
receive no education and often resort to rummaging through garbage dumps
to find a few items to sell or some scraps of food to eat. We need to ask why
the differences between the lives of workers and peasants in socialist China
and those in colonial and semi-colonial countries are so stark. This section
strives to provide some answers.

The most distinguishing character of China’s socialist development
was that it eliminated exploitation both internally and externally. All societies
since the end of primitive communism have produced surplus, which is the
amount of products produced above a given society's current consumption.
Historically, surplus produced by society was used to build religious temples,
palaces for kings and queens while they lived, and fancy mausoleums after
they died. Surplus also was and is used for military conquest and to support
the luxurious lives of the rich and powerful. Under feudalism surplus took
the form of in-kind rent payment. Under capitalism surplus has taken the
form of profit for capitalists who can use it for expanded capital accumula-

From Victory to Defeat

tion, for military expansion and to pay for their material comforts. Surplus
also takes the form of interest and rent. All forms of exploitation squeeze
surplus from the working masses. Under capitalism it is the capitalists’ pre-
rogative to decide whether to use the surplus for further capital expansion or
for extravagant consumption. The working people who produce the surplus
have no right to say how surplus is to be used. When a socialist country
eliminates exploitation, surplus can then be invested in producing useful
products and services for the working people.

China had no internal exploitation because socialism eliminated the
payment of profit, rent, and interest. This was possible because the state
sector phased out commodity production and labor power as a commod-
ity. In the collective sector after the formation of advanced co-ops, capital
(farm tools) ceased drawing shares from total output. Moreover, in both the
state sector and the collective sector great efforts were made to avoid layers
of bureaucracy doing only administrative and non-productive work. Once
exploitation was eliminated, all the surplus produced in the society could
be invested in machinery and equipment to improve the land and to build
infrastructure in order to expand future production. Equally important, in
socialist China surplus was not squeezed excessively from the workers and
peasants, so that significant improvements were made in their standard of
living. As stated above, production team leaders continued doing farm work
as part of their team. Most brigade leaders and those who carried out work in
the communes were very conscientious about doing their best work. Every
year when the harvest was complete, they faced criticism from their members
and engaged in self-criticism. Great attention was paid to whether leaders
took anything that belonged to the collectives for personal use. The leaders
shouldered huge responsibilities with very little material reward. They did
not exploit their members.

Perhaps even more important, during China’s socialist develop-
ment there was no external exploitation, which meant that no surplus was
siphoned out of the country. In most colonial and semi-colonial countries—
in addition to the exploitation of domestic landlords, capitalists, money-
lenders, and bureaucrats—surplus is taken out of the country in profits for
foreign monopoly capital and/or interest to foreign banks and international

® See William Hinton, Shenfan, The Continuing Revolution in a Chinese Village, Ran-
dom House, 1983. Hinton described the struggles in Long Bow Village in different
parts of his book including how cadres were criticized by the peasants.

Question V.

financial institutions such as the International Monetary Fund. Under the
worker-peasant alliance, China’s socialist development adopted a self-reliant
development strategy so that surplus created by the Chinese laboring class
stayed in China to develop its industries and agriculture.

What were the main factors in China’s self-reliant economic develop-
ment? Why is self-reliant development only possible under socialism?

The Two Major Dimensions of Self-reliant Development Strategy

‘The first dimension of self-reliance is an economic development that
relies on internal financing. In this world dominated by imperialism, less
developed countries must mobilize their own resources for development.
“Experts” in developmental economics created the myth that a poor country
has to rely on external finance to develop. However, this myth has been shat-
tered by what we have experienced in the past several decades. ‘The reality is
that by relying on foreign investment and/or foreign loans, less developed
countries lost many more resources than the very little they gained. They
are much worse off after several decades of “development.” By relying on
external finance, colonial and semi-colonial countries ended up owing huge
debts to international monopoly capital and international financial institu-
tions. International financial institutions dominated by monopoly capital
and imperialist nations have used debt as an instrument to force Structural
Adjustment Programs (SAP) onto debtors.

Through SAPs these powerful outside forces have been able to dictate
their internal economic and political affairs. Countries that have been placed
under SAPs lose their autonomy to decide how to use their own resources
to produce food and other necessities for their own people. Under SAPs
productive resources shift from domestic consumption to produce export
commodities in order to earn foreign exchange to pay interest on debt they
owe. Meeting the interest payment for their ever-growing debt becomes the
only objective for “development”; people’s basic needs are completely absent
from any “development” program. Moreover, with the help of international
trade and financial institutions, imperialist countries used this debt trap as a
vehicle to shift the burden of economic crises to debtor countries. The result
has been that large foreign multinationals have taken over many sectors of
their economies including manufacturing, communication, and transporta-
tion, as well as finance and banking.

From Victory to Defeat

‘The second dimension of self-reliance in China’s socialist development
is reliance on its own technology. Mao saw the importance of technology in
economic development, but he often explained in his talks and writings that
in order for a poor country like China to catch up with the West, China had
to rely on its own technological development. He used an easily understood
analogy to describe China’s technological needs: it must “walk on two legs.”
One leg was adopting advanced up-to-date technology from the West when
it was appropriate, by critically evaluating how such technology would fit
its own development needs. However, a country like China could not just
walk on this one leg. The other leg was the utilization of all different lev-
els of technology, traditional and indigenous, as well as developing its own
modern technology. The ability to utilize different levels of technology (the
more advanced new technology and the dated old technology) for devel-
opment in order to make use of all available (and scarce) machinery and
equipment is only possible under socialism. As explained in Question IV
the small-scale rural industries often did not use the most advanced. tech-
nology, but they were able to serve the increasingly modernized agricultural
sector by using the level of technology available to them—often machinery
and equipment phased out by industries in the state sector. This is a good
example of the “Walking on Two Legs” development strategy. In capitalist
development older and less “efficient” technology is driven out of the market
(and scrapped) by the newer and more “efficient” ones, essential to “planned
obsolescence” or “creative destruction.”

It is worthwhile to have a short discussion here on countries develop-
ing their own technology. For a semi-colonial country developing its own
technology is not simply a technical question. It involves a significant shift
in ideology. At the time of Liberation China had been under foreign domi-
nance for more than one hundred years. Foreign countries (from the West)
repeatedly defeated China by using their superior weaponry and sophisti-
cated technology. It was no wonder that Chinese people in general and Chi-
nese intellectuals in particular regarded the superiority of foreign technology
as absolute and believed that China could never catch up. This defeatist
attitude had to be overcome. China was able to develop its own science and
technology by painstakingly building a solid foundation from the basics,
including writing its own basic textbooks on science and technology, instead
of directly translating foreign copies. Making advancements in their own
technology was proven possible during the socialist transition because the

Question V.

ideology changed, leading people to believe that they had the ability.

Also, unlike other developing countries, there was no brain drain from
China during the socialist years. For many decades, year after year of unre-
mitting brain drain from developing countries (including China once social-
ism ended) to the Western countries has occurred with university educated
young people as well as well-known scientists leaving their own countries to
work in Western academies and high-tech industries. In fact, the brain drain
has been much more serious than what is seen by the steady emigration of
intellectuals because scientists in semi-colonial countries are incentivized to
pursue research subjects, not according to the development needs of their
own countries but according to whether their results are publishable in inter-
national academic journals. The loss of resources from brain drain is as seri-
ous as the draining of natural and financial resources from these countries.

An economic model based on self-reliance made it possible for China
to develop its economy during the socialist transition, to better the lives of its
people and to consolidate the alliance between workers and peasants. China
did receive financial and technological aid from the former Soviet Union in
the 1950s. Soviet aid, given in the spirit of helping another socialist state,
had a very positive impact on China’s heavy industry development. How-
ever, the Soviet Union withdrew all of its technical personnel and left many
projects unfinished in 1960 after the Chinese Communist Party criticized
the Communist Party of the Soviet Union for its revisionist path after its 20"
Congress in 1956. The Soviet Union also demanded immediate repayment
of all China’s debt.“° China learned the importance of self-reliance from this
experience.

It is also necessary to point out that self-reliant development does not
mean that a country has to totally rely on itself without trade with other
nations. China always maintained that it welcomed foreign trade, as long
as it benefited both trading partners and was carried out on a basis of equal
treatment. For many years, however, China was not able to trade with many
countries because of a United States imposed trade embargo.

Under the self-reliance model, China did import technology from
advanced capitalist countries. Alexander Eckstein wrote: “Complete-plant
imports from Japan, Western Europe, and to some extent the United States
are making a major contribution to the expansion of production capacity

“6 Including the debt China owed to finance the Korean War.

From Victory to Defeat

in the chemical fertilizer, petrochemical, and iron and steel industries, as
well as in power generation and commercial aviation, in the 1970s.”“” China
benefited from select technology imports because it was able to use them
not to substitute for its own technology but to replicate them. After a for-
eign-designed complete plant was imported and built, China was able to
build a copy in a fairly short time. John G. Gurley, another expert on Chi-
nese economy, said, “In the 1960s, China purchased four complete nitrog-
enous-fertilizer plants from the Netherlands, Britain, and Italy, which were
installed in 1966. It began building its own fertilizer plants in 1964, and
around this time set a goal of one large-scale plant for each of the country’s
180-190 districts and one smaller plant for each of the more than two thou-
sand counties. In fact, much of the increased production of chemical fertil-
izers in the 1960s came from the medium and small-scale plants that were
constructed throughout the countryside during the decade.” Gurley added
that China continued to import fertilizer from abroad as well. (Gurley, 249)
The small-scale plants he was referring to were those owned and operated by
communes and production brigades.

Developing socialism in a country such as China, where the produc-
tive forces were low, had some difficulties and challenges. (This will be fur-
ther explored in Question VI.) Yet, despite these difficulties and challenges
China succeeded.

The overwhelming majority of less developed countries bought into
the lie that they must rely on technology imported from advanced capitalist
countries. However, once a country becomes dependent on imported tech-
nology it must then adopt and accept the logic of capital and the way cap-
ital defines efficiency. If we follow the logic of capital, efficiency is achieved
when half of the workers are laid off and the remaining half work eighty
hours a week. Self-reliance in technology is critically important and closely
related to self-reliance in internal finance. When we contrast the self-reliant
development strategy with the one relying on external finance and imported
technology, the difference is clear. When a country becomes heavily indebted
to international monopoly capital and international financial institutions,
it has to forgo all other development objectives and use whatever means
necessary to increase its exports to pay interest on its debt. However, when
a country’s production is concentrating on exporting either agricultural

“7 Eckstein, 1978, 107.

Question V.

products or industrial products, it must also use advanced technology that
is controlled by monopoly capital. Since China adopted capitalist develop-
ment it has phased out almost all of the older capital equipment in its entire
textile industry. It had to import the newest technology in textiles in order
to make products that could compete with Taiwan, South Korea, and many
other countries in the international textile and clothing market. As many
textile factories closed down and tens of thousands of workers lost their jobs,
China’s textile industry became dependent on export markets and imported
technology, all of which are tightly controlled by international monopoly
capital.

China’ self-reliant strategy of development has proven that when a
country is free of foreign and domestic exploitation, hardworking people can
use the surplus they generate and the resources of its own country to develop
the economy for the satisfaction of the current and future needs of its peo-
ple and country. Imperialist propaganda wants us to believe that backward
countries need financial resources and technology from advanced countries
in order to develop. The success of China’s self-reliant development proved
that this propaganda was a myth created by the imperialist countries, so that
they could latch onto less developed but resource-rich countries and extract
every bit of surplus from them. In this era of imperialism, imperialist coun-
tries depend on colonial and semi-colonial countries to expand their capital
accumulation, so they turn the truth upside down to create that myth.

The Class Basis of China’s Self-Reliant Development

‘The class basis of China’s self-reliant development strategy was the
worker-peasant alliance. Under the worker-peasant alliance the State sup-
ported the agricultural sector’s development. In the beginning stage of eco-
nomic development in any society where there is little or no industry, surplus
for development can only come from the agricultural sector. This means that
the surplus needed to build industries has to be transferred from the agricul-
tural sector to the industrial sector. China under socialism was no exception.
‘The difference, however, is that in most colonial and semi-colonial coun-
tries the agricultural sector does not get replenished after industry begins
to develop. By pursuing the worker-peasant alliance, the socialist state in
China continuously replenished the agricultural sector with industrial prod-
ucts such as chemical fertilizer and pesticides, and agricultural machinery,

From Victory to Defeat

such as tractors, threshers, harvesters, and equipment for power stations and
irrigation systems. This was accomplished by State investment in agricultural
input industries and by pricing their products low enough so that the com-
munes could afford to buy them. The State also invested in infrastructure
like large irrigation projects, such the famous Red Canal, which spanned
several provinces.

The workers’ state in China consciously and deliberately aimed to
balance development between industry and agriculture, thus narrowing the
standard of living gap between people in cities and the countryside. This was
done by adjusting the price ratio between agricultural and industrial prod-
ucts in favor of the agricultural sector, by lowering the relative share of taxes
paid by the agricultural sector, by increased state investment in large agricul-
tural infrastructure and agricultural machine/equipment industries, and by
direct state grants to the collective sector. One example of a direct state grant
was for education. The communes used state funds to build schools and pay
teachers’ wages. The State also mobilized intellectuals in cities such as educa-
tors, agricultural experts, and medical personnel to work in the countryside
to raise the medical, educational, and cultural level for people living in rural
areas.

As stated earlier, China went through a socialist revolution while other
colonial and semi-colonial countries did not. China’s socialist revolution led
by the Chinese Communist Party was based on a very close alliance between
workers and peasants. During the revolution the CCP formed a broad
coalition with the national bourgeoisie on the basis of the worker-peasant
alliance. Even before the final victory of the liberation war in 1949, Land
Reform had already begun in the Liberated Areas and continued all over the
countryside after Liberation. To this day many colonial and semi-colonial
countries have not yet gone through genuine land reform. As explained in
Question I, the national bourgeoisie in many colonial and semi-colonial
countries is too weak to carry out land reform against the land-owning class.
In the world of imperialism only the working class in these countries is able
to lead a new democratic revolution to complete land reform and bring feu-
dalism to an end. ‘The socialist revolution based on the worker-peasant alli-
ance is the only way to end feudalism in the world of imperialism. However,
in China, carrying out genuine land reform and ending feudalism would not
have accomplished much unless the worker-peasant alliance continued to be
at the foundation of charting the path for future development.

Question V.

Land Reform alone could not have resolved the problems of back-
wardness and poverty in China’s countryside. As noted earlier, polarization
in China’s countryside became significant not long after Land Reform. With-
out the collectivization of agriculture, polarization would have developed
further and it would not have taken long for the land to be concentrated in
the hands of new rich peasants. Rich peasants with enough land and farm
tools could have hired laborers to work for them and then produced and
sold their surplus grain using the proceeds to buy more land. A polarized
countryside would have weakened or even destroyed the worker-peasant
alliance, because workers would have been faced with a divided peasantry,
and a polarized countryside would have promoted the class alliance between
the rich peasants and grain merchants in cities. After the revolution, the
proletariat, represented by the Chinese Communist Party, led socialist devel-
opment by pursuing the close worker-peasant class alliance strategy, which
made it possible to defend the class interests of the working people against
potential domestic and foreign exploitation. This class alliance made it pos-
sible for China to succeed in the socialist self-reliant development strategy.

Only after the collectivization of agriculture was it possible to build
an economic relationship between the (state-owned) industrial sector and
the (collective-owned) agricultural sector. The exchange between the com-
munes and the State was the material basis for the worker-peasant alliance.
The worker-peasant alliance class strategy was the basis for the success of its
socialist development. Imperialist countries deliberately prevent colonial and
semi-colonial countries from developing their economies independently in
order to achieve self-sufficiency in food and other basic necessities. Examin-
ing post World War II history we find that the bourgeoisie in many colonial
and semi-colonial countries had hoped to develop capitalism independently
from the imperialist countries. However, sooner or later the bourgeoisie
invariably found cooperation with foreign capital too attractive to their own
class interest to refuse such an opportunity. This has become increasingly the
case in the era of neoliberalism. Since the end of 1970s neoliberal strategy
has further broken down the barriers for capital to expand across national
borders.

‘The result is that the production of all countries is more closely con-
nected with the global market where the law of value has become applicable
across national borders. Many colonial and semi-colonial countries, which
had long concentrated on agricultural exports, now use more of their natu-

From Victory to Defeat

ral resources to meet export demands. Mexican farmers produce fruits and
vegetables to export to the United States, Chilean fishermen catch fish for
Purina to make cat food for imperialist countries, Columbian farmers con-
centrate on exporting flowers to beautify homes of petit bourgeois families
in Europe and North America, Brazilian ranchers clear the natural forest to
raise cattle to feed the hamburger industry in rich countries, and the list go
on and on. The other side of the story is that people in these countries have
become dependent on imports for their basic needs. Under NAFTA (North
American Free Trade Agreement) large-scale US government subsidized corn
flooded Mexico and wiped out Mexican corn producers and the indigenous
seeds used for cultivation by many generations of peasants.

During China’s war of liberation Mao saw that the interests of the
national bourgeoisie were squeezed by foreign capital and that they did not
have a future in a China taken over by imperialists; thus it was possible
for them to play a positive role in the revolution. The national bourgeoisie
agreed to be part of this broad coalition even though they understood the
goal of the revolution was socialism, which meant that eventually their class
would be eliminated.

The national bourgeoisie in colonial and semi-colonial countries
wanted to develop capitalism independent of imperialist powers—there-
fore they were a positive force in anti-imperialist struggles. They were
called “national bourgeoisie” to distinguish them from the bourgeoisie that
were closely connected with the foreign capital, also called “compradors.”
“National” meant that they could play a positive role in the national lib-
eration movement and had a progressive meaning. In the early part of the
post-WWII era the national bourgeoisie led and joined national liberation
movements in many parts of the world.

As described earlier, independent capitalist development pursued by
the national bourgeoisie failed completely in the 1980s. In the neoliberal
era the bourgeoisie in colonial and semi-colonial countries today play a
rather different role when compared with the past. When production and
exchange in these countries became so closely connected to the monopoly
capital in imperialist countries it created the opportunity for the bourgeoisie
to work closely with the global monopoly capital of the imperialist coun-
tries. The bourgeoisie that work closely with foreign monopoly capital has
been rewarded handsomely. For this reason I am not so sure they should
still be called “national bourgeoisie.” With fewer and fewer exceptions the

Question V.

bourgeoisie class in semi-colonial countries today sells the interests of their
own country to monopoly capital to enrich themselves. They do not do
anything that promotes the interests of their own country. Therefore, in the
anti-imperialist movement should the workers and peasants who lead the
struggle continue to form a coalition with the bourgeoisie? Or should the
bourgeoisie be a target in the fight against imperialism? Mao's worker-peas-
ant alliance strategy for liberation has stood the test of time; it is still the only
class strategy in the colonial and semi-colonial world where the majority of
the working people are peasants. However, should Mao’s strategy of form-
ing coalitions with the bourgeoisie be modified in the neoliberal phase of
imperialism? The nature of bourgeoisie in today’s colonial and semi-colonial
countries is a question today’s revolutionaries need to consider carefully.

From Victory to Defeat

Question VI.

What Challenges and Difficulties did China Face During Socialist
Construction?

In the Chinese Revolution and the Chinese Communist Party, Mao ana-
lyzed China’s society as semi-colonial and semi-feudal. Mao led China to win
the socialist revolution and to develop socialism, despite the fact that China’s
capitalist development was still in its very early stage. Developing socialism
in a country where its productive forces were minimally developed presented
some serious challenges and difficulties. Even with these serious challenges,
China made spectacular achievements during the socialist construction. In
hindsight we have a better understanding of the challenges China faced and
the kinds of problems they created during socialist development.

An analysis of these challenges can not only help other semi-colonial
and semi-feudal countries in their pursuit of socialist development, it can
also help explain at least partially why, after a few short decades, China’s suc-
cessful socialist development that benefited hundreds of millions of people
was aborted in 1978. Of course, there were those who betrayed the socialist
cause and in China those traitors have since been clearly identified. But sim-
ply calling them traitors does not help us understand the underlying causes
for their betrayal. Unlike religion, socialism does not depend on faith or
saintly behavior. Marxists must investigate the concrete situation and come
up with an analysis based on the objective and subjective factors in China
at that time.

As noted earlier, Karl Marx believed that the proletariat in advanced
capitalist countries were likely the first ones to make socialist revolution and
develop socialism. His reasoning was that when capitalism reaches its mature
stage, the contradictions between the private ownership of means of produc-
tion and social production deepens. This contradiction prevents productive
forces from further development unless there is a change in the relations
of production—a revolution that appropriates the private ownership of the
means of production.

In the mature stage capitalism, where production is already oper-
ating at a very large scale, the transfer of ownership from private to pub-
lic—although it would require tremendous political, economic, and social
struggles—could proceed without too many complications, because both

Question VI.

industrial and agricultural production would already be operating at the
same scale. After the revolution the ownership of large industrial complexes
and large-scale farms could be transferred to the State, changing private
ownership to public. However, in a country like China (in 1949) and in
other semi-colonial and semi-feudal countries, there were only some small-
scale industrial enterprises in cities and small-scale peasant family farming
in the countryside. Therefore, it wasn’t possible to transfer the means of
production from private ownership to one single public ownership. Instead,
the State took over the means of production of industrial enterprises and in
agriculture the three-tier communes collectively owned the means of pro-
duction in agriculture. During the entire period of socialist development in
China, state ownership and collective ownership co-existed. Mao foresaw
the potential problems created from the two types of ownership and often
expressed concern.

After the transfer of ownership of means of production to one single
public ownership in countries where capitalism has reached the advanced
stage of development, there would be continued struggle to make the
socialist economy run smoothly in the economic base. Also, probably more
importantly, there would be ongoing struggle to continuously meet chal-
lenges in the superstructure—political, ideological, and cultural—with the
goal to eventually bring commodity production to an end. During this time
of transition, the volume and the scope of commodity production would
be gradually reduced to an insignificant level and eventually fade away. As
commodity production fades away, the law of value (equal value exchange)
would cease to dominate people’s consciousness. Then we will have reached
socialism—the early stage of communism.

However, in socialist China, when the two types of ownership coex-
isted, the exchange between the state sector and the collective sector and
within the collective sector increased. Most of these exchanges were com-
modity exchanges, although they were strictly regulated. Therefore, when
productive forces developed under the two types of ownership, commodity
production, instead of decreasing in volume and scope, increased in both. It
is reasonable to assume that when commodity production increased in both
volume and scope the law of value continued to play a role and was likely to
play an increasingly important role. In China’s case, even though regulation
helped prevent the law of value from expanding without bounds, neither
commodity production nor the law of value could be regulated out of exis-

From Victory to Defeat

tence. These were the capitalist elements at work in China’s growing socialist
economy. Not only must we recognize them, but we must also thoroughly
reckon with them in order to understand the challenges they posed to Chi-
na’s socialist development.

Below is an attempt to analyze the challenges posed by the low-level of
development of productive forces during socialist construction.

The Coexistence of Two Types of Ownership of the Means of Produc-
tion

As described earlier, under collective ownership China’s agriculture
made tremendous progress in building agricultural infrastructure, modern-
izing and increasing production, and brought tremendous improvements
to people’s lives. These achievements were made possible by the hard work
of the peasants and the economic relationship that the collective sector had
with the state sector. As explained above, the means of production in agri-
culture were collectively owned by the communes, which had three tiers of
ownership: the commune, the brigade, and the team. The team was the basic
accounting unit. At this basic accounting level peasant households put their
resources—land, farm tools, and labor—together and distributed the team’s
output according to the labor contributed by team members. The produc-
tion team was in fact a rather small unit of around 20 peasant households,
but it was difficult to enlarge the basic accounting unit to the brigade level,
which would expand the number of households to several times of the size
of the team. The reason for the difficulty was that enlarging the size of the
basic accounting unit to the brigade level by combining resources of several
teams would even out the income of all the teams. Such consolidation would
have disadvantaged the higher income teams by pulling their income down
to the average.

This does not mean it would be impossible to enlarge the basic
accounting unit—only that it would require time. When the brigade owned
more and more large agricultural machinery and equipment (such as trac-
tors, combines, threshers, and planters) and made them available for all
teams to use, then the differences among the teams became relatively small,
and every team benefitted although maybe not equally. The same is true for
consolidating several brigades into a commune as the basic accounting unit.
During socialism, many communes, especially the rich ones, were able to use

Question VI.

their accumulation funds to build large-scale irrigation projects including
electric pumping stations, to purchase large agricultural instruments and to
build factories. These kinds of development paved the way to enlarge the
basic accounting unit to the commune level. By 1978, however, when Deng
carried out the capitalist reform, very few communes had been able to grow
the basic accounting unit to the brigade level.

We know how capitalism polarizes society, while socialism does the
opposite. However, in the concrete case of China when there were two types
of ownership, the equalizing impact was limited. The reason is that while
state ownership enabled different parts of China to develop more evenly, col-
lective ownership was able to equalize development within units, such as the
teams, but it could not help equalize income among collectives (brigades and
communes). It was even less possible across different regions. As explained
earlier, under state ownership more advanced industrial enterprises helped
set up and develop other new industrial enterprises by aiding them with
machinery and equipment, as well as technical personnel, without mone-
tary or any other compensation. This was because all industrial enterprises
were under the same unified accounting unit. Thus, the exchanges between
or among different enterprises were not commodity transactions. The State
could deliberately even out the industrial development in different parts of
the country by allocating more resources to the less industrialized areas. That
was how industrialization expanded from China’s East and Northeast, where
industries were more developed to the West and Northwest where barely
any industries had existed. Moreover, all workers of state-owned enterprises
were paid according to the same wage scale with small adjustments made
accounting for the regional differences in the cost of living. This also had
an equalizing effect on workers’ standard of living across the whole country.

Under collective ownership equalization did take place within a col-
lective unit, especially within the basic account unit: the productive team.
Within the productive team the worth of each work point was the same, but
the number of work points earned from a day of labor by its members still
ranged between four to ten depending on the physical strength and techni-
cal skills required. Within a productive brigade, the levels of income among
the teams were only somewhat equalized, because team members shared
what the brigade and the commune was able to provide. On a much wider
scale, equalization did not take place across different communes in differ-
ent regions. Instead, collective ownership resulted in polarization; the rich

From Victory to Defeat

communes in rich regions became relatively richer and the poor communes
in more backward regions became relatively poorer. During the early 1970s
when rural industrialization began, the income gaps between the richer
and the poorer communes, as well as the gap in the rates of development,
increased. In developing socialism in countries where productive forces are
at a low level of development, it is necessary to maintain the two-type own-
ership—but for how long?

In Mao’s A Critique of Soviet Economics he posed the question in point
19: “Is Long-Term Coexistence Between Two Types of Socialist Ownership
Possible?” He agreed with the Soviet textbook that a socialist state and social-
ist construction couldn't be established on two different economic bases for
any length of time. He said, “We therefore extend the logic to reach the
following conclusion: the socialist state and socialist construction cannot
be established for any great length of time on the basis of ownership by the
whole people and the ownership by the collective as two different bases of
ownership.”“* He continued to say that in the Soviet Union the period of
coexistence had lasted too long and that “the contradictions between the
two types of ownership are in reality contradictions between workers and
peasants.” The contradictions between workers and peasants were contra-
dictions among the people that resulted from the coexistence of two types of
ownership necessary due to the low level of development.

During the socialist transition in advanced capitalist countries, how-
ever, there would not be a need for the coexistence of two types of owner-
ship. Advanced capitalist countries would face challenges that are different
from that of China and other less developed countries.

China was and still is a very large and very diverse country. Before
Liberation there had been very little industrial development, and the dif-
ferences in the level of agricultural development in different parts of the
country were mostly due to their natural endowments—the richness of the
soil, the availability of water, and the climate. Trading centers that had land
and water transportation became very prosperous. For example, the Yangtze
River Delta was traditionally rich in agricultural production due to its mod-
erate weather, rich soil, and plentiful water resources. Before Liberation, this
area also led the nation in industrial production in cities such as Shanghai.

48 Mao Zedong, A Critique of Soviet Economics, translated by Moss Roberts, Monthly
Reviews Press, 1977, 53.

® Thid., 53-54.
74

Question VI.

A city like Shanghai had the advantage of being a seaport where most trade
with the outside took place, and it was also connected to China’s vast interior
by land and water transportation.

During socialist development, the unified state ownership of indus-
trial enterprises in different geographic areas with differences in productive
facilities and technological sophistication were evened out (equalized), with
more advanced enterprises helping less advanced enterprises. Since these
enterprises belonged to a single owner, resources could be moved around
according to an economic plan, and there was no need to compensate the
more advanced enterprises for helping less advanced enterprises. On the
other hand, the collective ownership (though better than private ownership)
in the countryside created not only polarization among communes and
regions but also contradictions between the state sector and the collective
sector. These contradictions could not be easily resolved when the two types
of ownership existed side-by-side. This posed an important challenge for
development.

It is easier to understand the complexities of the situation by examin-
ing some concrete issues. One major issue was how to produce enough food
for the Chinese people. There was a large gap in grain production between
different regions. Grain production was high in the Yangtze River Delta area
and in China’s southern provinces, while in other areas grain production
was much lower due to the poor quality of land and scarce water resources.
‘These areas did not produce enough grain to feed the people. Therefore,
grain had to be shipped from the areas where there were surpluses to areas
where grain supplies were insufficient. During socialist development, great
emphasis was placed on self-reliance both on the national and on regional
levels. Peasants in poor areas worked extremely hard to be self-sufficient in
food. However, the country as a whole still had to depend on grain and other
agricultural output from rich agricultural areas. Therefore, the State, looking
after the interests of the whole nation, had to persuade the communes in the
rich agricultural areas to continue putting more resources into agriculture in
order to ship food to poorer agricultural areas. As stated earlier, areas rich in
agriculture were also more developed in industry. Agricultural production
has lower rates of return compared to industrial development. The interest
of the collectives in the rich areas was to invest more in industries for faster
and higher returns. However, the State regulated that they had to retain 40%
of their earnings to be invested in agriculture and in their welfare fund. The

From Victory to Defeat

production brigade and communes that owned the industrial enterprises
followed the regulations, but not without resentment.

During my trip to China in 1979 when the capitalist reform had just
begun, I visited a production brigade of a rich commune in a rich county.
This brigade owned a light bulb factory, which was established in the mid-
1960s, when China's agriculture stabilized after the three difficult years
(1950-61). During the early years, the factory only had enough money to
rent three rooms to produce simple light bulbs. By 1979 it was producing a
large variety of light bulbs including light bulbs for automobiles, florescent
lights, and many others. The factory under collective ownership had the
characteristics of a capitalist enterprise. It was eager to expand its market
so it could increase its sales and enlarge its revenue. This collectively owned
industry and others like it found their relationship with the State restrictive.

Beginning in the mid-1960s many of these collectively owned indus-
trial enterprises sprouted up in rich communes and there was not enough
time to incorporate them into the national economic plan as quickly as they
developed. I do not have enough information to conclusively prove this was
the fact, but the criticisms launched against these enterprises lend my assess-
ment validity. The criticism of these brigade/commune-owned industrial
enterprises charged that in order to acquire raw materials, they went through
private connections to get what they needed from the state enterprises. This
kind of criticism usually came from the Left, which disliked what was going
on but did not know how to resolve the contradiction. They often used
the wrong tactics by blocking these kinds of dealings through criticism and
enforcing new rules. The actions of the Left (some might call them “ultra-
Left”) further alienated these enterprises. The light bulb factory was likely to
be a strong supporter of Deng’s capitalist reform. The manager of the light
bulb factory told me that after the capitalist reform began, they were very
happy that a business in Hong Kong came to order Christmas lights from
them. A collectively owned small factory found the opportunity to expand
its production through new policies under Deng’s reform. There are many
more examples like this light bulb factory. It is important for us to identify
the forces in China that supported Deng’s capitalist reform; it is a mistake
to think Deng did it single handedly as if he possessed some magic power.

Chinas success in making revolution and developing socialism
depended on the strong alliance between the workers and peasants. During
socialist construction the CCP was able to use state policies to strengthen

Question VI.

their alliance when the economic base was under the coexistence of state
ownership and collective ownership. These policies resolved the contradic-
tions between the agricultural and industrial sectors, which in reality were
contradictions between workers and peasants. Resolving contradictions
between workers and peasants was easier when the economy was just begin-
ning to develop. However, as the economy developed further in the 1970s,
the contradictions became more numerous and complex. (See below.) In
the meantime, those who opposed socialism manipulated the contradictions
and opportunistically turned them into contradictions between the people
and the enemy.

Low Level of Development and Other Contradictions Among the Peo-
ple

‘The low level of productive forces posed challenges resulting in con-
tradictions among the people. These kinds of contradictions can be resolved
by putting appropriate and timely policies in place.

Concretely, in China, when the output level was very low, one chal-
lenge was finding the right relationship between accumulation and con-
sumption. For example, in order to speed up development in agriculture,
enough resources had to be accumulated into agricultural machinery and
equipment, building infrastructure and land improvement. On the other
hand, as a poor country there was an urgent need to provide adequate food
and other necessities of life for the people. In 1959 right after the com-
munes were established, Mao saw the contradiction between accumulation
and consumption as a serious issue and quickly applied the appropriate pol-
icy to resolve it.

In 1958 there were good harvests. The production of grain and other
agricultural products went up yet the State had problems fulfilling its pur-
chasing quotas in grain and other products. Mao went to Zhengzhou, Henan
to investigate the problem in 1959 and gave three talks during the Zheng-
zhou (Agricultural) Conference in February and March 1959." In these talks
he reported what he found and suggested solutions. Mao explained that the
reason behind the difficulty in fulfilling the government’s purchasing quotas
was that peasants reported lower production figures than the actual amounts

°° Mao Zedong’s Talks during the Zhengzhou Conference February and March,
1959 in Long Live Mao Zedong Thought, 1967, 8-53.

From Victory to Defeat

they had harvested. He found that peasants under-reported to avoid paying
more taxes and/or other levies imposed on them from higher yields. Accord-
ing to Mao’s estimate, if peasants had reported their production honestly
then after taxes and other levies the peasants would have only 30-35% of
their production left for their own consumption. By not reporting the real
production numbers the peasants were able to retain another 10-15% of
what they had produced.

Mao described the six layers of administration units above the pro-
duction team: the central government (State), the provincial government,
the regional government, the county government, the commune and the
brigade. After deductions made by all the different levels of government, the
peasants only retained 30% of their production. He said the level of taxes
and other levies was too high; they amounted to taking away peasants’ pro-
duction without compensation. Mao stood on the side of peasants, saying
that the peasants had a right to guard what was theirs and supported their
action to falsify their production numbers. His suggestions to resolve the
contradiction was to first consider how much the peasants would need to
live and then calculate the amount of taxes and levies. He believed that the
peasants should be able to keep 50% of their production for their consump-
tion, state taxes limited to 7-10%, and the commune accumulation fund
limited to around 15-18%, with the remaining funds allocated for other
administrative expenses. Mao advised the communes not to be too eager
to invest in agricultural machinery and equipment and build large-scale
infrastructure so the amount collected for the accumulation fund could be
reduced. He also put forth that paid administrators at different levels of gov-
ernments should be kept at an absolute minimum; he specifically mentioned
that artists and cultural groups should continue their work in agricultural
production; encouraged cadres to understand the lives of ordinary peasants
by visiting and staying with them; and emphasized the importance of a close
relationship between the cadres and peasants.

‘There was also dissatisfaction in poorer communes. As explained ear-
lier, the productive team first paid taxes to the State and then paid the com-
mune to cover the accumulation and welfare funds. A portion of the rest was
distributed to team members as quota grain. ‘The leftovers were used to pay
team members according to the work points they earned during the year.
The problem with the very poor commune/teams was that the total income
of the team was so meager that often after all the deductions were made,

Question VI.

there was little left for distribution according to work points earned. In those
teams/communes people who worked hard all year would not receive much
above the quota grain that everyone received. As a result they did not receive
any compensation for their labor. This did not fulfill the distribution princi-
ple of “to each according to his/her labor.”

According to William Hinton’s assessment, by the time the communes
were dissolved in 1985, one third of all communes had done exceedingly
well, the third in the middle had done well, but the bottom third had done
poorly. With the exception of the very poor teams, each member received
an income according to work points accumulated from the labor he/she
contributed. However, at the national level the worth of one day’s labor
differed tremendously among rich and poor communes. The worth of one
day’s labor in rich communes could be ten times as much as that of the
poor communes. The collective ownership of means of production could
only equalize the income within the team and somewhat within the brigade
and the commune, but not among different communes or across different
regions. In fact, during China’s socialist development, in the countryside the
rich got richer and the poor got poorer. The rich communes and the poor
communes faced very different sets of problems. Therefore, there could not
be one single solution. The worker-peasant alliance policies during the land
reform and during the collectivization of agriculture had been applied more
or less uniformly in different parts of the countryside, but by the early 1970s
there was no policy that could be applied with such uniformity to deal with
all the new situations. Due to the diverse conditions in different parts of
China’s countryside, an appropriate worker-peasant alliance policy for rich
regions would have to be very different from that of poor regions. The more
differentiated the levels of development in China’s countryside, the more
complicated and individualized the policy needed to be.

Another contradiction among the people related to the low level of
development of productive forces was that some production team members
sought opportunities to earn some money outside of their work points earned
from tending the land, planting and harvesting. Since commodity exchanges
still existed at different levels of the communes, there were opportunities to
earn extra income from trading. Additionally, each farm household still had
a private lot. Peasants used these private lots to grow some vegetables and to
raise a couple of pigs and chickens to supplement their diet. The low level
of productive forces meant that the worth of each work point remained low,

From Victory to Defeat

so the opportunity to produce more in the private plots and sell the extra
products in the free markets was very attractive. This provided the capitalist
roaders the opportunity to propagate their policy of “san zi yi bao” (three
self’s and one contract), which meant a policy: 1) to enlarge the private plots
of land; 2) to expand the free markets; 3) for peasant households to sign con-
tracts with the government, which would stipulate the prices and quantities
of grain the peasant households were obligated to sell. The contract allowed
peasants to keep whatever they made above the amounts stipulated in the
contract as “profit” and suffered a “loss” when sales did not cover the costs.
Advocates of this policy claimed that it would motivate peasants to work
harder and produce more.

Mao opposed this policy. It was obvious that if the private lots and free
markets continued to expand, peasants would spend more and more time
and labor on their private plots and eventually collective ownership would
collapse. Peasant families would go back to farming their own small pieces of
land, wiping out all the infrastructure built under the three-tiered commune
ownership, and rendering the machinery and equipment bought from the
accumulation fund useless, because it would have been impossible to divide
and distribute them to individual households. (This happened as described
after the Capitalist Reform. See Question VII.) Yet the private plots and the
free markets were still needed for the time being. Only when the productive
forces reached a higher level, when the work points earned from one day of
work on the collectively owned land was worth more than a day of work
on the family’s private lot, would peasants no longer focus their efforts on
their private plots. Before reaching that level of development, private plots
could not be forcibly taken away, nor the free markets closed. In the mean-
time, as long as the private lots and free market existed, the opponents of
socialism continued to try to tear collective ownership apart, as evidenced
by Deng Xiaoping’s immediate de-collectivization of agriculture as soon as
he and his supporters seized power. By 1985 the process of de-collectiviza-
tion was complete and Chinese peasants went back to individual farming.
Most of the infrastructure peasants had worked so hard to build fell into
disrepair. Capitalist propagandists claim that the problem of socialist China
was that political chaos made economic development impossible and the
economic stagnation made Deng’s capitalist reform necessary. In fact, the
exact opposite was true. The productive forces developed very rapidly and
such development created new contradictions, which were not resolved in

Question VI.

a timely fashion. These contradictions meant that workers and peasants no
longer had a strong unified material basis on which to solidify their alliance.
The CCP’s sound worker-peasant alliance policies gave the working people
the solid foundation to win the revolutionary war and to build a socialist
country. However, under collective ownership and how it was linked to state
ownership, China’s countryside developed rapidly but unevenly. The uneven
development of China’s countryside made it very difficult and complicated
to advance the worker-peasant alliance. In less developed countries where
peasants are the majority of the working population, the strength of work-
ing people can only be as strong as the unity between workers and peas-
ants. Those in the CCP who favored capitalist development for China took
advantage of the weakening unity between workers and peasants and made
their own alliances with those who saw their own potential for capitalist
development.

When building socialism with a low level of productive forces, capital-
ist elements continue to be part of the development. When commodity pro-
duction continues to exist and even expands in scope, the law of value plays
a role. The law of value manifested in the contradictions among the people,
which could then transform into contradictions between the people and the
enemy, necessitating the two-line struggle. Of course, two-line struggle will
also exist in socialist development in imperialist countries where the pro-
ductive forces are already fully developed. However, that two-line struggle
will be different. The two-line struggle in socialist development in countries
with fully developed productive forces will probably be concentrated in the
superstructure and not so much in the economic base. In countries where
productive forces are still at a low level of development, the two-line struggle
is more concentrated in the economic base where two types of ownership
coexist and commodity production continues to expand. China faced this
critical challenge during its socialist development. This is still a preliminary
analysis and much more work and discussion are needed to understand the
role of the law of value when commodity production continues to exist and
expand.

The Problem of Restricting the Power of Cadres in State-Owned Indus-
trial Enterprises

One of the biggest challenges faced by any country during the social-

From Victory to Defeat

ist transition is how to restrict the power of cadres who are in charge of the
state-owned enterprises. This challenge is not limited to the less developed
countries like China; countries whose productive forces are fully developed
would also face the same challenge. How cadres use power bestowed by the
State is of critical importance. Whether they use their power to serve the
socialist cause or to become the agents of capital determines the direction of
the transition.

In China concrete measures limited the power of the cadres in state
enterprises. The most important measure was to raise the class-consciousness
of workers. Especially after the Cultural Revolution, factories adhering to
the principles of the Angang Constitution were able to revolutionize indus-
trial organization. The Angang Constitution called for putting proletarian
politics in command and articulated concrete methods to transform the
relationship between ordinary workers and cadres in leadership. Instead of
always following orders given by cadres, workers were given the opportu-
nity to express their opinions and encouraged to take initiative in advanc-
ing technological changes. And, of course, permanent employment status,
as opposed to temporary employment under the contract labor system
advocated by Liu Shaoqi, made the factory a permanent place for workers.
During the socialist period, workers in industrial enterprises had a sense of
ownership. When Deng carried out his capitalist reform and the machinery,
equipment, and factory buildings were auctioned off, many workers strug-
gled mightily to defend them. However, in the end they were not strong
enough to resist the takeover.

For the real changes in the relationship between the cadres and work-
ers to take root, much more time and more fundamental change would
be needed because the division in the responsibilities of the cadres and
the workers remained largely unchanged. The cadres continued their core
responsibility of disbursing funds appropriated by the State, including funds
for current operations, investments, and wages. The disbursing of these dif-
ferent kinds of funds represented real power. During the socialist period,
the overwhelming majority of cadres did everything they could to “serve
the people” and did not cross boundaries to abuse the power they possessed.
Part of the reason was that they did not abandon their principles and contin-
ued to put public interests above their own self-interest. Additionally, they
understood that those who held higher positions in the government and
devoted themselves to work for the benefit of the people would not tolerate

Question VI.

graft and bribery. Moreover, due to repeated mass movements they were very
aware that they were under the watchful eyes of the workers and the masses.
However, this does not negate the reality of their power and the temptation
to use it for self-interest. Many of these cadres supported Deng’s capitalist
reform. Deng’s capitalist reform legitimized turning managers’ power into
personal wealth. It opened the floodgates of tremendous amounts of wealth
to be siphoned from state enterprises into the pockets of these former cadres.
Further discussion will follow in Question VII.

At the end of the liberation war, how to transfer power possessed by
members of the Communist Party who held important positions in manag-
ing the State to the vast number of masses was and continues to be one of
the biggest challenges to all those who take up the task of building socialism.
China’s experience has shown that class struggle continues after Liberation.
The outcome of this struggle determines the direction of the transition:
socialist or capitalist. In 1976 the strength of the bourgeoisie was stronger
than that of the proletariat. Forces representing the proletariat were defeated.
The direction of the transition was reversed from socialism to capitalism. As
Mao once said, on the long road to final victory there will be many twists
and turns but the future is always bright. The proletariat has to analyze and
evaluate reasons for each defeat and be prepared for the continuation of the
struggle.

‘The brief analysis above on the challenges China faced during the
socialist transition points out the only most obvious. It is far from com-
plete; more research is needed. I believe that revolutionaries today whose
goal is to build a brand new socialist society need to spend time and effort to
thoroughly study China’s concrete experiences where workers and peasants
successfully built a socialist society but were ultimately defeated.

From Victory to Defeat

Question VII.

What has happened to China and Chinese people after the count-

er-revolutionaries seized power in 1976?

Seizing Political Power and Implementing Capitalist Reform

After Mao Zedong died in September 1976 a group of capitalists
within the Chinese Communist Party staged a coup, arrested the “Gang of
Four” (Jiang Qing, Yao Wenyuan, Zhang Chungiao, and Wang Hongwen),
and seized political power. The new regime propagated their version of the
historical development of the revolution and denounced the Cultural Rev-
olution as a mistake Mao made in his old age. After a short period of tran-
sition, the new regime officially began its Reform at the conclusion of the
Third Plenary Session of the Eleventh Congress of the Chinese Communist
Party in December 1978. The new regime, led by Deng Xiaoping, purported
to not have a definite plan for its Reform and Opening Up program claim-
ing it would “cross the river by touching the stones’—meaning the Reform
would proceed one step at a time without following a grand plan. ‘The reason
for this pretense was that Deng tried to avoid making public the concrete
capitalist projects he planned to put in place. By examining the concrete pol-
icies that Deng’s Reform enacted, however, one can see it was in fact a well
thought out and well-integrated plan. The Reform put together all the cap-
italist projects Liu and Deng had attempted to carry out during the 1950s
and 1960s without success. Given that experience, Deng knew that when
the Reform began, they had to disguise the capitalist nature of the projects,
because people still remembered them. Therefore, they claimed, and have
continued to claim, the Reform is “socialism with Chinese characters.”

Deng’s Reform consisted of two interrelated components: capitalist
reform in China and opening up China’s economy to link it with the inter-
national capitalist system. Within a short amount of time, Deng and his
followers began to dismantle the socialist economic and social system built
during 19561976 by fundamentally changing the relations of production, as
well as the superstructure, from socialist to capitalist. The Reformers under-
stood that the principal opponents of their Reform would be the working
people (workers and peasants) so their class strategy was to create disunity
among the workers to weaken their power and to break up the close alliance

Question VII.

between workers and peasants. During the socialist construction, the State
and collective ownership of the means of production was fundamental to the
socialist class strategy: the unity of workers and their close alliance with peas-
ants. To be successful the capitalist Reformers had to attack this economic
base. However, since the socialist superstructure supported the socialist eco-
nomic base, the capitalist Reformers had also to fundamentally change the
superstructure from socialist to capitalist.

Fundamental Changes in the Relations of Production

1) The Industrial Sector

‘The goal of the capitalist reform was to change the former state-owned
industrial enterprises, which had been in the process of phasing out com-
modity production, into privately owned profit-making enterprises. In the
process of transforming these industrial enterprises the Reform also changed
labor power, which was in the process of being phased out as a commodity
during the socialist transition, back into a commodity to be bought and
sold—in order to reverse the process of socialist reform discussed in Ques-
tion II. (A).

During the socialist transition, Liu Shaogi and Deng Xiaoping made
repeated attempts to replace the permanent workers in state-owned enter-
prises with temporary contract workers—but before they seized political
power their attempts were defeated. Liu and Deng saw that the abolishment
of permanent employment status in state enterprises would enable peasants
to compete with workers for jobs, thus putting downward pressure on wages
and benefits of industrial workers. They saw competition among workers
and between workers and peasants as key to capital accumulation, which
they believed would speed up economic development. Mao, on the other
hand, regarded permanent employment as a fundamental right of workers
in state enterprises during the socialist era. He correctly saw that permanent
employment strengthened the power of workers, because it was a prereq-
uisite for workers in state ownership to assert their influence on managing
factories in order to eventually lead the factories. If the working class was to
become the masters of their socialist country they had to start by becoming
masters of the factories in which they worked.

‘The struggle for permanent employment status versus replacing per-
manent workers with temporary workers was part of the overall two-line

From Victory to Defeat

struggle between the socialist forces and the capitalist roaders. During and
following the Cultural Revolution, the socialist forces had the upper hand,
until the capitalists seized power in 1976.

In the mid-1980s when the new regime embarked on its reform of
state enterprises to eventually privatize them, new factory managers were
given more and more autonomy to run the factories, including the right to
hire and fire workers and replace permanent workers with temporary ones.
Before the regime began its formal restructuring of state enterprises, man-
agement applied all kinds of tactics to divide the workers, including re-in-
troducing “material incentives” in wage payment, such as paying bonuses
and piece-wage rates. However, most workers recognized that “material
incentives,” which had been criticized during the Cultural Revolution, was
a tactic to divide workers and they refused to go along. Workers resisted the
Reformers’ attempt to use material incentives as a tactic to entice them to
work faster and compete with one another. During the early 1980s the rate
of inflation went up so in many factories workers simply divided up the
total amount of bonuses and distributed them equally as a way to soften the
impact of the rising cost of living.

Question II. (A) explained how phasing out commodity production
was basic to transforming the relations of production in state enterprises.
The process of phasing out commodity production in state enterprises meant
that production in state enterprises no longer followed the law of value to
maximize profits, but rather to produce useful products according to an eco-
nomic plan. During socialist construction, all state enterprises were under
one unified accounting system and each enterprise no longer calculated their
own “revenue” and “cost” to arrive at its own “profit” or “loss.” The State
bought all their products and supplied all materials needed for their produc-
tion. The State also transferred a “wage fund” to pay the workers’ wages and
benefits. The goal of capitalist reform was exactly the opposite. It aimed to
transform each state enterprise from producing useful products according to
an economic plan into a separate unit, each seeking to maximize its profits
and competing against one another for survival.

Following the passage of the Economic Structure Reform (of indus-
tries) in 1985, the State began to contract out state enterprises to individuals
or teams of managers. Who had the opportunity to contract these enter-
prises? Only those who were in positions of power or those who had close
connections with those in power. The new managers of these enterprises

Question VII.

were given the authority to separate parts of the enterprise that were not
profitable by selling or leasing them and to keep the parts that were prof-
itable for themselves. These new profit-making enterprises were allowed to
keep portions of the profits and handed the rest to the State. Later, manag-
ers of these new enterprises were allowed to keep all the profits they made,
extracted from the workers’ surplus labor, and only paid taxes on their earn-
ings to the State—just like private corporations in other capitalist countries.
Today, there are only a few key industries—mostly in national defense (or
defense related), public utilities, and transportation—that remain under
state ownership. Even these enterprises operate like capitalist corporations;
the only difference is that they are required to fulfill their obligations to the
State. A number of Chinese state and private enterprises had their Initial
Public Offering (IPO) in Hong Kong, the United States and other coun-
tries outside of China. The Economic Structure Reform relinquished the
State’s economic ownership of most enterprises to private individuals or
groups. Ihe Reform fundamentally changed the relations of production in
the industrial sector.

2) The Agricultural Sector

As the capitalist Reformers proceeded to dismantle the state enter-
prises and rebuild a labor market where labor power could be bought and
sold, they also moved to dissolve the communes in the countryside. The
Agricultural Reform enacted the “Family Responsibility System” which
redistributed land and other collectively owned properties to individual
peasant households. Small-scale rural industries were divided up and then
contracted to individuals who had political or family connections. The com-
mune system was formally dismantled in 1984. The centralized State pur-
chasing and marketing system, which was responsible for purchasing and
distributing grain and major agricultural products, also ceased to function.

The Reformers got the support of the peasants by bribing them with
a higher purchasing price for grain and for other agricultural products. The
price for grain purchases within the set quota went up by an average of 25%
with an additional 50% in bonuses for above quota purchases. From then
on, peasants became mostly reliant on the market as the main mechanism to
regulate their production. Urban residents no longer received food rations
at low prices. Grain production increased rapidly from 1979-1984 with an

From Victory to Defeat

increase of 22.5%. It was during this period that de-collectivization took
place and was eventually completed in 1984.

After the commune was dissolved, prices of all agricultural inputs
including chemical fertilizer, water, fuel, and pesticides increased, thus wip-
ing out peasants’ gains from higher purchasing prices for their output.

Dissolving the communes was a calculated and necessary move for the
Reformers. Without collective ownership in the countryside workers could
no longer form an alliance with the peasants. The Chinese Communist Party
(representing workers) had formed a close alliance with the peasants when
fighting the Revolutionary and Civil Wars by promising them land reform.
Peasants sacrificed their lives and their loved ones when they joined the Red
Army to fight the guerrilla war. Without the peasants the Chinese Commu-
nist Party could not have won the revolution. After Liberation, the CCP
strengthened the worker-peasant alliance by collectivizing agriculture and
by carrying out policies that mutually benefited workers and peasants. The
strong alliance between workers and peasants was key to socialist construc-
tion. When the capitalist Reformers broke the worker-peasant alliance by
de-collectivizing agriculture, they weakened both the worker and peasant
resistance against capitalist projects they enacted.

3) Linking the Chinese Economy to the International Capitalist World
Market

Deng Xiaoping, the mastermind of the capitalist “Reform and Open-
ing Up,” saw correctly that in order for Chinese capital to grow in strength
it had to cooperate closely with foreign capital. However, since China had
suffered a long history of imperialist aggression, some Chinese Communist
Party members who supported the Reform were concerned about whether
China would be strong enough to remain independent while cooperating
with foreign capital. The 1980s and early 1990s China’s negotiations with
the GATT (General Agreement on Tariff and Trade) on terms and condi-
tions did not go smoothly, because China did not want to give in too much.
By the mid-1990s and especially after the Asian crisis in 1997, however, the
Chinese government had to give up many of the conditions it had insisted
upon and joined the WTO (World Trade Organization) at the end of 2001.

During the worldwide crisis of overproduction since the late 1970s,
monopoly capital urgently needed to find new investment opportunities and

Question VII.

to further expand markets for its surpluses. Thatcher and Reagan pushed
forward their neoliberal plan by taking down all barriers for capital expan-
sion across national borders worldwide. China’s capitalist Reformers were
just as eager to establish a link with international capital to develop capi-
talism. Deng bought into the neoliberal ideology of comparative advantage
and calculated that China’s large pool of disciplined workers could serve
as an advantage in the international division of labor by concentrating on
exporting labor-intensive products. The Reformers saw how Taiwan, Hong
Kong, and others used exports of labor-intensive products to spur economic
growth and believed China could emulate that model to exponential effect.
Furthermore, establishing an outside link would garner external support for
their Reform.

It is important to point out here that although capitalist reform would
enable capital to exploit labor, without the “Opening Up” component the
surplus value could not be realized into profit to achieve capital accumula-
tion. Therefore, “Capitalist Reform” and “Opening Up” were both necessary
components for capital accumulation for the new capitalists in China.

‘The goal of capitalist “Reform and Opening Up” was for China's capi-
tal to expand and for its capitalist class to gain strength. The strategy has been
to cooperate with international monopoly capital to achieve rapid capital
accumulation through high-speed economic growth. In order to achieve its
goal, the Reformers completely disregarded the suffering of the Chinese peo-
ple and the damage of high GDP growth on China’s land, natural resources
and environment. Question VII. will discuss China’s capitalist “Reform and
Opening Up” in the context of the world of imperialism and the concurrent
struggle of the world’s laboring class against international monopoly capital.

Fundamental Changes in the Superstructure

In order to deconstruct socialism and build capitalism, Reformers
had to fundamentally change the superstructure as well as the economic
base. Soon after they seized political power, the new regime rescinded from
the Constitution workers’ right to strike and basic democratic rights of the
masses, including free expression, that were gained during the Cultural
Revolution. During socialist times Mao advocated that the Party should be
closely connected with the masses and the government initiated various mass
movements to give the masses the chance to speak out and to express their

From Victory to Defeat

opinions. The Three-Anti and the Five-Anti movements, the movement to
support the Korean War, the Great Leap Forward, and finally the Cultural
Revolution were all launched to mobilize the masses and encourage them
to be involved with policies that affected their lives. Through the process of
mass movements, the masses understood the meaning of the government
policies and their significance. Mao believed that when the masses under-
stood and approved of polices to be implemented there was a better chance
for success. State sponsored mass movements, such as the ones conducted
in socialist China, are historically very unusual because those in power initi-
ated and encouraged the involvement of the masses from below. During the
socialist period periodic mass movements were a method to understand and
resolve contradictions in society and move society forward.

However, the implementation of policies under the capitalist reform
was distinctively different from the past. As a rule, new policies were put
in place by passing laws and regulations and then pushing them down to
the masses. It’s understandable that the Reformers did not want to involve
the masses because the policies they tried to implement were against their
interests. Since the Reform aimed to fundamentally change class relations
in society, it generated many contradictions. As contradictions intensified
there was no way for workers and peasants to express their dissatisfaction as
in the past through mass discussion and mass action. By the late 1980s many
of the masses were angered by the corruption of the Reformers and the way
people were being mistreated. There were also pro-West groups of students
who demanded “Western style democracy,” or bourgeois expressions of indi-
vidual “freedoms.” Spontaneous demonstrations began to sprout up. The
demonstrators mistakenly believed, based on past experience, that the State
would listen to their grievances and respond to their demands. This was the
period of time when many reform policies were put in place including pol-
icies to welcome foreign investment. In order to show that the new regime
had no tolerance for any mass action from below, and threatened by the
legions of workers who began organizing to support the initial spontaneous
protests, they brutally crushed the demonstrations in many cities during the
spring of 1989. On June 4" the government moved the Army into Beijing
and killed many of the demonstrators who remained or were fleeing Tianan-
men Square. As the government took action, people were genuinely shocked
to witness the People’s Liberation Army soldiers opening fire and massacring

Question VII.

unarmed students and workers.*!

Ideology is, of course, part of the infrastructure. At the same time
the Reformers proclaimed themselves communists, they began to propagate
capitalist ideology, popularizing slogans such as: “Let a few get rich first,”
and “Unemployment is a good thing, because workers work hard if they’re
afraid of losing their jobs.” The Reformers designed the new industrial orga-
nization by giving the head of the enterprises new authority to run the fac-
tories and discipline workers. The capitalist Reform changed the economic
base by taking away people’s basic rights to a job, a living wage, healthcare,
housing, retirement and education. A new set of ideologies had to be prop-
agated to justify their policies. The Reformers proclaimed that socialism was
inefficient because, “Eating from a big pot breeds laziness.”

Soon after the Reform began, entrance examinations to higher educa-
tion were reinstated. The new education policies concentrated on cultivating
a new elite that would separate themselves from the workers and peasants
and prepare to be future rulers. Mao’s “three big mountains oppressing Chi-
nese people” —feudalism, imperialism, and bureaucratic capitalism—under
the Reform became housing reform, health care reform, and education
reform. After 30 years of socialism and 40 years of Reform, most workers
and peasants have seen through the guise. They say, “What we have now
is not socialism with Chinese characteristics. It is actually capitalism with
Chinese characteristics.”

Fundamental changes in superstructure are as important as funda-
mental changes in the economic base. During socialist times most of the del-
egates to the National People’s Congress were workers and peasants. Today,
National People’s Congress delegates are business owners and intellectuals.
‘They are all of considerable wealth. The last National People’s Congress
in March 2019 had its annual meeting in Beijing and the delegates were
guarded with special security fences. Someone commented, “The people’s
delegates must be kept away from the people.”

The All-China Women’s Federation made significant contributions
towards gender equality during socialist times. It promoted model women
workers and peasants and equal pay for equal work, which raised many
women’s pay to that of men. After the Reform it has not done anything to
protect women’s legal rights or to protect women workers from being abused

*! Before the massacre took place leaders of the pro-West student groups had left

Tiananmen Square later emigrating to Taiwan and the United States.

From Victory to Defeat

and/or assaulted. It no longer advocates for women to “hold up half the sky,”
as an expression of women’s power during socialism. The current Women’s
Federation promotes classes that teach petit bourgeoisie women how to cook
and decorate their houses.

China’s Capitalist “Reform and Opening Up” and the World of Imperi-
alism

1) China’s high rates of GDP growth

During the 40 years of capitalist “Reform and Opening Up,” China’s
GDP grew at very impressive rates. In 15 of the 40 years its real rates of GDP
growth were in the double digits, from 10% to as high as 15.2%, averaging
around 9% per year during the four decades. (There is a general agreement
that the official China’s growth rates need to be discounted by 2%.) Even
though in more recent years China’s GDP growth has slowed to 6-7%, it has
still been quite a bit above the GDP growth of advanced capitalist countries
and other developing countries. It’s fair to say that the high rate of GDP
growth is an accomplishment of the Chinese Reform. However, it is nec-
essary for us to understand how such rates of growth were achieved and at
what cost.

‘The continuing high rates of growth elevated China to become the
second highest GDP producing country in the world, second only to the
United States. This change has had significant consequences on the world
of imperialism—both on global monopoly capital and on the international
working class. Moreover, the consequences of high rates of GDP growth
on China as a country and on its people are tremendous and far-reaching.
Capitalists all over the world and, of course, in China celebrate the great suc-
cess of China’s Reform. How do we, contemporary revolutionaries, evaluate
China’s Reform from a broad, long-term perspective?

Technically speaking, China’s high GDP growth came from a combi-
nation of high rates of export and investment growth. GDP is the aggregate
of consumer spending (C), investment spending (I), government spending
(G), and net exports (exports minus imports, or X I). GDP = C+1+G+
X—I. China’s high GDP growth was mainly derived from high net export
growth rates and high investment growth rates. Both of these high rates of
growth were accomplished by calculated policies of international monop-

Question VII.

oly capital and by the new Chinese regime representing the new capitalist
class. The cooperation between them formally began at the end of 2001
when China joined the WTO and agreed to play by the rules determined
by international monopoly capital. From then on they both competed and
cooperated. The capitalist “Reform and Opening Up” linked China to world
imperialism. Its GDP was able to grow at amazingly high rates through high
export growth rates and high investment growth rates. Below we will see
how these high rates were accomplished and discuss their consequences.

2) The New International Division of Labor and China’s Export Growth

‘The international division of labor among countries before World War
II and up to the 1970s was very clear. The imperialist countries produced
industrial goods and sold them to colonial and semi-colonial countries,
while the colonial and semi-colonial countries supplied raw materials and
energy needed for the industrialization in imperialist countries. The impe-
rialist countries used any means necessary, including military invasion and
occupation, to stop colonial and semi-colonial countries from industrializa-
tion so they could maintain their domination over the sources of material
and energy they needed for their industries, and at the same time maintain
and expand the market for their industrial products. Ceaselessly searching
for raw material and energy and relentlessly pushing to expand markets have
been the reasons for endless wars, brutal pillage, and destruction of people
and land in the modern era.

By the second half of the 1970s imperialism was in crisis. The rate of
growth stagnated, there were serious problems of overcapacity in all fields of
manufacturing due to overinvestment and inadequate aggregate demand.
In other words, it was not that people did not need more material goods
to satisfy their needs but that they did not have the money to buy them.
Under capitalism the markets do not recognize needs; needs only count
when backed with purchasing power to become demand. ‘The grain stores
overflow but people are hungry. Additionally, organized workers in imperi-
alist countries grew in strength, and they fought for higher wages and better
benefits, both of which ate into corporation profits. A new strategy of capital
accumulation was urgently needed.

‘Thus began the neoliberal strategy of capital accumulation that started
with the policies of Thatcher and Reagan, designed by global monopoly cap-

From Victory to Defeat

ital. The neoliberal strategy was and is to liberalize capital by breaking down
all the barriers across national borders for capital investment and trade. The
content of neoliberal imperialism included privatization, liberalization and
de-regulation. These concrete policies intended to and succeeded in breaking
down the barriers in colonial and semi-colonial countries set up to resist for-
eign trade and foreign investment. Privatization aimed to dissolve nationally
owned industries in these countries for foreign companies to acquire. Liber-
alization and de-regulation lowered restrictions on foreign capital, including
rules to protect labor and the environment. In 1995 the World Trade Orga-
nization (WTO) was established to replace the General Agreement on Tariff
and Trade (GATT). The WTO broadened its scope to include not only tariff
and trade but also cross border investment of multinational corporations.
By this time Western corporations, especially US corporations had already
expanded their investment into other countries.

Neoliberal strategy has helped increase the speed and extend the scope
of the expansion of multinational corporations and facilitate a new interna-
tional division of labor. When international monopoly capital was free to
go wherever it wanted, it gave multinational corporations the freedom to
select their production location. Moreover, with the help of international
trade and investment organizations, such as the WTO and the International
Monetary Fund, these powerful multinational corporations grasped the
power to internationalize their production and the freedom to split up the
production of each product to be produced in different countries. With the
internationalization of production came the new international division of
labor. Imperialist countries no longer wanted the exclusive right to produce
industrial products. Instead, colonized and semi-colonial countries would
receive orders to produce parts of a product or certain categories of prod-
ucts. Thus, since the late 20" century, the internationalization of production
added another dimension of imperialist aggression and exploitation to the
pillaging of raw material and energy from colonial and semi-colonial coun-
tries, and the push to further expand markets.

The Organization for Economic Cooperation and Development
(OECD) describes how international production, trade and investments are
increasingly organized today within “global value chains” (GVCs), where
different stages of the production process are located across different coun-

Question VII.

tries.” According to OECD, setting up the global value chain “motivates
companies to restructure their operations internationally through outsourc-
ing offshoring of activities.” The grand design of GVCs is made within the
powerful multinational corporations with careful considerations regarding
trade and financial arrangements. Countries where production actually takes
place do not have any say in this grand design; they can only compete with
one another by offering the multinationals the best conditions, including
the low tax rates (even tax exemption for extended periods), high allowance
for profit repatriation, suitable infrastructure for transporting goods, sim-
plified bureaucratic procedure, little or no environmental regulation, basic
education and appropriate training for workers, and strict rules against labor
organizing—and state repression to enforce such rules. Additionally mul-
tinational corporations also enjoy the right to leave all of their production
waste on foreign soil.

China’s capitalist Reform and how it linked China to international
monopoly capital came at an opportune time. But the timing was not
something that happened by chance. Back in the 1960s four client states
(or territories) of the United States—Taiwan, South Korea, Hong Kong,
and Singapore—were chosen as a testing ground for the export-led growth
model. Multinational corporations from the US and Japan invested in these
countries (territories) for the sole purpose of exporting their products. The
export-led growth strategy created the myth that when developing coun-
tries increase their exports at all costs, growth and prosperity surely follows.
In fact, the export-led growth benefited the imperialist countries and their
monopoly capital far more than the countries that adopted this strategy. In
the 1970s the United States passed environmental protection laws, and com-
panies that wanted to circumvent these laws and take advantage of cheap
labor moved their production to Taiwan, South Korea, etc. Two large cor-
porations, RCA and Atari, are good examples. These companies and many
others that followed seriously polluted Taiwan’s natural environment and
severely injured the workers who worked with toxic materials in the facto-
ries. Worker struggles against RCA for justice for the serious and potentially
fatal health consequences they suffered continue today. In the meantime
RCA has been sold and has become part of a French company.

Deng Xiaoping praised Taiwan's export-led growth model and vowed

* OECD Official website: OECD.org

From Victory to Defeat

that China could do better with its exponentially larger labor force. His
famous southern investigation tour cemented the strategy of export-led
growth for China. Shenzhen, originally a fishing village, was chosen to be
the center of production for exports. Today, Shenzhen, together with the rest
of Pearl River Delta, has become the industrial hub of 4.2 million people,
most of who migrated from all over China, and where the notorious Fox-
conn Company is headquartered.

‘The concrete example of the making of iPhones shows how the new
international division of labor benefited Apple, an American high-tech mul-
tinational. Apple introduced its new product in 2007 and sold three million
iPhones that year, 5.3 million the next and eleven million in 2009. A working
paper published by the Asian Development Bank in 2011 gave a breakdown
of how Apple benefited from parceling out its production through a global
value chain. The iPhone was assembled in China with its different compo-
nents produced in the United States, Japan and South Korea. The working
paper showed that the completed iPhone sold in the United States for $500
in 2009. $178.96 of the $500 was actual manufacturing cost, and the rest,
or $321, was what it called the gross profit. Gross profit might not be an
accurate term, because it included the cost of selling the iPhone, including
advertising costs. A large proportion of the $178.96 manufacturing cost was
what Foxconn paid for importing parts from the above-mentioned coun-
tries and a small profit accrued by Foxconn after subtracting other produc-
tion related costs. Worker wages in each assembled iPhone constituted only
$6.50, a merely 3.6% of the total manufacturing costs.

In addition to the extremely polluting production of crude steel, so
too is the production of the inordinate amounts of clothing, shoes, toys,
bicycles, air-conditioner units, washing machines, solar panels, and many
other household items produced solely for the purpose for export. All these
products are exported and arrive in the US and other imperialist countries
clean and free of pollutants—the toxic waste is left behind. Rarely do we
see any analysis that relates China’s pollution problem to the role China has
played in the international division of labor in the current capitalist system.
However, a recent article, “A Dirty Secret China’s Greatest Imports: Carbon
Emission,” by Earth is worth noting. The article begins with: “The U.S. and
much of the Western world have a dirty secret. While we claim to be work-
ing diligently to decrease our emissions and switch to cleaner, non-fossil
fuel energies, we are actually just exporting emissions to other countries,

Question VII.

most notably China.” The article explains that while “the world turns toward
China to be its dirty manufacturer, we all clean up our books, pushing our
emissions and energy consumption onto them. We let China produce and
ship our goods, and then say, “Who me? I don’t produce emissions. I’ve cut
mine. China is to blame.’”*”

‘The article continues to say that the United States has been decreasing
its total energy consumption, dropping from 359 BTU per person per year
in 1978 to 308 BTU per person per year in 2009, and while it has reduced
its coal consumption (from 50% to 45% of its electricity fuel mix), it has
increased its coal exports from 26 million short tons in 2009 to 40 million
short tons in 2010 reaching 10% of its total coal production. US coal exports
to China during the first half of 2010 was 1,000 times that of the first half
of 2009. The article continues to say that researchers have determined that
approximately 1 billion tons of carbon dioxide emissions in China are from
the production of products destined for export to other countries.”

3) High Level and High Growth Rate Investment is Unsustainable

High levels and high rates of investment growth have been the other
important contributors for China high GDP growth rate. On November 27,
2012 the IMF published a working paper entitled, “Js China Over-Investing
and Does it Matter?” The article stated that in 2012 the rate of investment
in China reached 50% of GDP, and it explored the problems related to
overinvestment. It asserted that China’s investment level was already high in
2007 and when the great recession hit the world in 2008-2009, the Chinese
government began to implement a rescue plan of $586 billion, which was
spent on a wide range of infrastructure investment projects. Thus, invest-
ment as percentage of GDP was further raised by 2012 to over 50%. In any
country, imperialist or colonial/semi-colonial, a 20% of GDP investment
rate is considered very high.

‘The government spent the rescue package by vastly expanding infra-
structure. The high rates of investment resulted in overcapacities in many
industries. One example was overcapacity in the solar panel industry.

> hetp://www.earthmagazine.org/article/dirty-secretchinas-greatest-import-car-
bonemissions

4 Tbid.

* International Monetary Fund working paper No. 12/277, November 21,
2012.

From Victory to Defeat

According to an article published by McKinsey & Company on “China’s
Great Rebalancing/ Promise and Peril,” in less than a decade China’s solar
panel industry went from non-existent to become dominant in the world.
The ten largest Chinese manufacturers today account for more than 60% of
global solar panel production and in 2010, 96% of the solar panels China
produced were exported. The article continues to say the problem of this
growth was almost entirely production driven.” Solar panel production is
also highly polluting.

Additionally, housing stock expanded rapidly, reaching a level far
above people’s ability to buy, causing the fear of a housing bubble burst.
From the government rescue package came the extensive construction of the
transportation network, which included 30,000 kilometers (18,600 miles) of
high-speed railway and 35,000 km (22,000 miles) of highways.*’ The major
infrastructure construction facilitated the flow of goods and people. At the
same time, tremendous waste resulted from over-building. Many four-lane
highways built in small towns are still deserted, while whole cities and towns
with rows and rows of residential and commercial buildings, roads, hotels
and exhibition centers stand empty. This overinvestment has represented an
extreme imbalance in the Chinese economy and caused tremendous damage
to China’s natural environment. Despite the efforts made by the govern-
ment to rebalance China’s economy to correct the low level of domestic
consumption, the level has stayed unchanged at around 40% of GDP. The
level of consumption cannot be raised, because of the low wages of Chinese
workers. The detrimental effects on China’s environment from 40 years of
capitalist development will be discussed later, but over-investment has cer-
tainly been a contributor. One shocking figure can help illustrate the envi-
ronmental impact of over-investment: China’s cement consumption in three
years (2011-2013) was more than US cement consumption in the entire 20"
century.*8

°° Huang Yasheng, “China’s Great Rebalancing: Promise and Peril,” McKinsey &
Company, June 2013

*” Project-Syndicate, April 2, 2019, Project-Syndicate.org and China National High-
way, Wikipedia

*8 Swanson, Ana, “How China used more cement in 3 years than the U.S. did in the
entire 20th Century,” Washington Post, March 24, 2015.

Question VII.

4) China Has Become an Imperialist Country—the growth of Chinese
monopolies and rapid expansion of foreign investment

It was during the high rates of investment in the past ten years that
Chinas GDP grew exponentially. China’s economy almost tripled in size
from 2008 to 2018, with GDP reaching $13.6 trillion. Compared with the
GDP of Japan, in 2008 China’s GDP was 50% smaller, but by 2016 China's
GDP was 2.3 times larger than that of Japan.” During this decade China’s
industries went through mergers and acquisitions and became major giant-
sized global corporations. In 2018 China had 120 companies on the Fortune
500 list, just behind US, which had 126 companies, and ahead of Japan,
which only had 52 companies listed.“ Chinese capital has definitely become
monopoly capital.

As China has expanded its GDP and has exported large volumes of
products abroad it has needed more raw materials (including minerals, lum-
ber and cotton) and energy to feed the production of these products. China
has invested heavily in Africa, Latin America and the Middle East, as well
as in Europe and Australia, to secure its supply of raw materials and energy.
China became a dominant player in the energy sector by 2008. In 2017
China surpassed the United States and became the largest crude oil importer.

‘The quest for oil and raw materials has been one important reason to
further expand its foreign investment. Another reason for China’s expansion
of its foreign investment was that, since 2008, China ran out of places for
further infrastructure building. China announced its ambitious “One Belt
One Road” initiative (BRI) in October 2013 to expand its infrastructure
investment overseas and to secure its huge demand for energy and raw mate-
rials, as well as to create commercial relations to expand markets for Chinese
exports. BRI clearly expressed China’s ambition to expand its influence in
commerce and trade, as well as in the political sphere.

The BRI framework calls for open cooperation and direct foreign
investments (FDI) designed to lay the infrastructure and industrial foun-
dations to secure and solidify China’s relations with 68 countries on three
continents. Ihe BRI, once complete, will reach more than 60% of the global
population, account for nearly one third of world’s GDP and global trade,

» Zhang Jun, “Chinas Decade of Sweeping Economic Change, Project Syndicate,” Apr
2, 2019, 1-4.

6 ChinaDaily.com.cn, July 20, 2018.

From Victory to Defeat

and 75% of its known energy reserves. Under this plan, China will be linked
to Europe through Central Asia and Russia; to the Middle East through
Central Asia; and to Southeast Asia, South Asia, and the Indian Ocean via
both land and sea routes. The BRI involves the funding and construction
of a system of roads, railways, oil and natural gas pipelines, fiber-optic and
communication systems, ports, and airports that will have implications on
global energy security in the coming decades.”

So far, China has built and paid for seven dams in Cambodia, which
generate half of the electricity in that country. Sri Lanka borrowed $1 bil-
lion from China to build a deep-water port. China owns it and is leasing it
to Sri Lanka for the next 99 years. South Africa borrowed $1.5 billion to
build a coal-fired power plant—one of 63 such power plants China has built
around the world. Zambia borrowed $94 million to build a large soccer
stadium.” So far the total amount of China’s investments and loans is still
rather small, but China possesses large stores of US dollars and other foreign
currencies and the has potential to expand foreign investment along the BRI
and beyond.

5) The Impact of China’s Development in the Past Forty Years

Following 30 years of socialism, China joined the world of imperialism
and has become an imperialist country. This development has tremendously
benefited international monopoly capital. China has provided a space for
international monopoly to expand and a space for overflowing commodities,
generated by the fevered capacity to produce, thus helping moderate the cri-
sis of the capitalist system for the time being. However, this development has
been destructive to the international working class and has further deterio-
rated the world’s natural environment. China’s large work force joining the
international division of labor exerted strong downward pressure on wages
in all countries, especially in imperialist countries. Capitalists in imperialist
countries have been able to take advantage of global production and shipped
manufacturing jobs to China and other countries that followed its model.

$! Sucharita Gopal, Joshua Pitts, Zhongshu Li, Kevin P. Gallagher, James G. Bald-
win and William N. Kring, “Fueling Global Energy Finance: The Emergence of China
[; Global Energy Investment,” lttps://www.mdpi.com/1996-1073/11/10/2804/
P

° “How China became a Super Power,” China Rules, https://www.nytimes.com/inter-

active/2018/11/18/world/asia/world-built-by-china.html

100

Question VII.

This development at least partially explains the stagnated wages and
reduced benefits in the United States and other imperialist countries. In the
neoliberal phase of imperialism, where capital is free to choose its location of
production, it has become increasingly difficult for workers to engage capital
in their struggles for higher wages and better benefits: capital can simply
pack up and leave. During the past several decades, workers in the United
States have not been able to make any advances or even defend what they
once fought for and won.

As wages started to rise in China from strong demand for labor in the
last decade due to fast growing GDP and export manufacturing, businesses
moved from China’s coastal provinces to smaller cities in Central China to
seek lower wages. Oversea investors from Taiwan and Hong Kong that had
contracted local businesses to produce began moving to other low-wage
countries, such as Sri Lanka and Bangladesh for textile and clothing pro-
duction. Many local business owners who lost their contracts simply closed
down their shops and disappeared with unpaid wages owed to workers and
unpaid loans owed to the banks. Low-wage Foxconn workers, who made
iPhones for Apple, now work for Huawei, a Chinese owned high-tech firm
that out-competed Apple in the Chinese market. Now Huawei just found
the new place for its production and marketing: India.

In the process of China becoming another imperialist country, inter-
national monopoly has gained and the international working class has lost.
China provided the imperialist world with large numbers of industrial work-
ers, thus lowering wages for monopoly capital. Moreover, China exported
low-priced consumer goods to other imperialist countries, dampening the
pressure of inflation. However, the growth of China’s immense industrial
workforce will eventually strengthen the international working class. The
new international division of labor has created greater potential for unit-
ing working class struggles across all countries. It is up to the proletariat to
seize the opportunity to realize such potential. China’s capitalist “Reform
and Opening Up” gave international monopoly capital the opportunity to
incorporate China into the world of imperialism. It came at an opportune
time to rescue global capitalism from its crisis. Now, 40 years later, with
added capacity for production and the generation of even bigger surpluses,
the crisis of global capitalism has only become deeper and more entrenched.
Additionally, the global environmental crisis has worsened and become more
critical.

101

From Victory to Defeat

China’s Capitalist “Reform and Opening Up” and China’s Working
Class Struggles

During the forty years of capitalist “Reform and Opening Up,” Chi-
nas new ruling class created a large—perhaps the largest—army of the
unemployed in history (by any measurable standard). At the same time,
the Reform transformed hundreds of millions of peasants into the fastest
growing population of industrial workers. In the past four decades the focal
point of class struggle has shifted from the old industrial centers during the
socialist construction, to the center of export industries located in the south-
ern coastal cities. During the same forty years, Chinese society went through
tremendous changes, which have resulted in deep internal contradictions
that have permeated throughout China’s cities and countryside. These con-
tradictions in Chinese society have manifested in different intense struggles,
which will be discussed in another section.

1) The Reform Created a Large Army of Unemployed

In the 1990s, former state-owned factories went through rounds of
restructuring that laid off tens of millions of workers, who only received a
very small monthly payment below the minimum amount needed to sub-
sist. The newly unemployed workers were also deprived of any healthcare.
Hospitals and health clinics that previously provided medical care to workers
began charging high fees to cover their own costs as required by the Reform.
In 2004 I visited Shenyang, which had been a flourishing industrial city in
northeast China where heavy industry had been concentrated. By that time
it looked like a ghost town where stores, nurseries, barbershops, and bath-
houses were all shut down. Unemployed workers lined the street selling a
few household items including family pets for cash but nobody was buying.
‘These workers displayed “for hire” signs offering to work any odd job but no
one could afford to hire them.

A friend who accompanied me on that trip took me to the home of
an unemployed worker. Everyone in the household—the husband, the wife,
and the son—were all unemployed. The family tried to make a few RMB
(Chinese dollars) by selling some food items on the street, but the small cart
they had bought was overturned by a strong wind and everything was lost.
The husband told me that he suffered from very bad stomach pain. When
he went to the hospital the doctor ordered an expensive test and after pay-

102

Question VII.

ing for the test he had no money left to buy the medicine. The wife was a
factory worker all of her adult life, but her job was terminated. The son was
over thirty years old and a discharged soldier. He said that he felt his life was
over. Tens of millions of laid-off workers in many industrial cities all over
China were in similar situations. All of them tried to find some way to eke
out a living. Some did succeed as street vendors, taxi drivers or food servers.
Many women became prostitutes. Like their Third World sisters and broth-
ers, they became part of the underground economy. These former proud
factory workers have to constantly look for buyers for their labor power just
to survive. At the same time, they face relentless harassment and abuse from
the police. The police often charge them with some trumped up violation
and force them to pay a fine that wipes out the entire earnings from their
day’s work.

‘The privatization of state-owned enterprises has been a major compo-
nent of China’s capitalist Reform. In the early 1990s hundreds of thousands
of factories in older industrial cities all over China started going through
rounds of restructuring. Many laid-off workers fought to save the factories
where they had worked for decades from being closed or sold. Workers pro-
tected the machinery and equipment from being moved away and destroyed.
But they could not sustain their struggle against the powerful political forces
of privatization. By the late 1990s and early 2000s the big wave of privatiza-
tion was over, but there were still continuing efforts to take over what still
remained. Below is one example how in 2005 workers successfully resisted
the take-over of one large steel complex in Jilin Province.

Tonghua Steel was a state-owned enterprise under the jurisdiction of
the Jilin Provincial State Asset Supervision and Administration Commis-
sion. It was a large steel enterprise and had once employed 30,000 workers.
In 2005 Jianlong, China’ largest private investment company, bought 40%
of Tonghua Steel shares. After the sale of stocks, Tonghua became a joint-
stock corporation and Jianlong’s management took over key management
positions. Tonghua began losing money once Jianglong acquired the shares.
Then in 2008 the financial crisis hit the steel industry hard, and Tonghua
lost even more money that year. Worker wages were cut to an average of
300 RMB per month, much below the 600-800 subsistence wage level. In
March 2009, Jianlong made the decision to sell its shareholdings. When
the news was announced, Tonghua’s workers celebrated with firecrackers.
Then the workers worked hard, determined to save the enterprise. By early

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From Victory to Defeat

2009, when the price of steel recovered somewhat, the enterprise showed a
small profit, causing Jianlong to decide to take over enterprise again. Jilin’s
provincial government reached a secret agreement with Jianlong to acquire
a controlling share of Tonghua. Contrary to normal procedures, which were
to announce the acquisition in a meeting of the staff and the workers’ repre-
sentative congress ahead of the deal, the news was announced after the deal
had been made. Upon the announcement, a number of Tonghua’s general
managers resigned on the spot.

How the deal was made and announced infuriated the workers. Early
on the morning after the announcement, 3,000 workers and their families
staged a demonstration in front of the main office carrying signs reading,
“Jianlong, get out of Tonghua’ and calling for a mass demonstration. A large
number of demonstrators gathered and proceeded to the metallurgy section
of the factory compound and succeeded in blocking the railway lines leading
to the blast furnaces. By the early afternoon they had blocked all the railways
and shut down all seven blast furnaces. The whole production of Tonghua
came to a halt. When Chen, the newly appointed General Manager of Ton-
ghua Steel from Jianlong Group, arrived with a team to talk to middle man-
agement and staff representatives about ways to resume operations, a group
of demonstrators rushed in and dragged Chen out of the room and later
beat him to death. By early evening, nearly ten thousand workers gathered;
they did not allow any government officials to enter the building. At around
9:00 in the evening, Tonghua Steel announced on television that the Jilin
provincial government asked Jianlong to withdraw and never to participate
in restructuring Tonghua Steel again. This is a rare case in which workers
successfully blocked the privatization of their factory. Then, only one month
later in August 2009, workers in Linzhou Steel in Henan Province were also
able to block Fengbao Iron and Steel Company from acquiring their steel
enterprise.

During the early stage of Reform, worker struggles against capital
were mostly in factories built during the socialist period. The struggles were
against the privatization of those enterprises and against labor reform turn-
ing labor power into a commodity by establishing a labor market where
workers were hired and fired. In later stages, the struggles moved to post-so-
cialist built factories.

104

Question VII.

2) The Growth of Industrial Workers and their Struggles

After the Reformers broke up the communes in the countryside, peas-
ants and their families could no longer live on selling what they could grow
on their small plots of land. Moreover, agricultural infrastructure, such as
the irrigation and drainage systems built during socialist times, fell apart
due to lack of maintenance. Other services that existed under the commune,
such as healthcare and education, which had supported peasants’ daily lives
and their overall welfare, all disappeared for lack of funding. In the early
2000s I visited a village in Henan Province. Peasants in this village had used
their increased income from selling grain at higher prices in the mid-1980s
and built some nice houses. They had exhausted their savings and were left
without reserves to help them through the lean years when their incomes
dropped due to higher priced farm inputs. The primary school house (just
a little hut) in the village was about to collapse because its walls were full
of cracks. The teacher of the school had not been paid for over a year even
though she continued to teach.

These kinds of conditions force many younger family members to
leave home to find jobs so they can send some of their wages home. Older
parents and small children stay behind to guard their small piece of land.
During the early 1990s the number of young people leaving home to work
in the export industries in coastal cities totaled about 100 million—now
their numbers have increased to around 300 million. Today there are still
around 300 million peasants remaining in the countryside who barely sur-
vive on the money their children send home. They often have to abandon
farming or just grow some vegetables for their own consumption. As a result
China’s scarce arable land has become even scarcer. Their lives are very hard
and some do not survive. There have been reports (not frequent but not
rare either) where grandparents have poisoned their grandchildren with pes-
ticides and then committed suicide. I still remember vividly what an old
peasant said to me: “I followed Chairman Mao in his fight against capital-
ism. But I did not really know what capitalism was. Now I know. This is the
capitalism Chairman Mao warned us about.”

While the former state enterprises laid off their workers during their
restructuring, a total 300 million people, about the size of the workforce in
the entire European Union, migrated from the countryside to cities to work.
When the new regime wanted to use exports of low-priced labor-intensified

105

From Victory to Defeat

products to spur economic growth, it welcomed subcontracting firms owned
by overseas Chinese in Taiwan, Hong Kong and Singapore to invest in cities
in Guangdong, Fujian and other coastal cities and in the city of Shenzhen.

Large numbers of male and female migrants work in these factories
producing exports. Mostly men work in construction projects and in trans-
portation infrastructure, while women work in restaurants, hotels, and/or as
domestic workers for the wealthy and many become prostitutes. The sub-
contracting businesses produce clothing, household items, footwear, sport
equipment, toys, and electronics. They also make computer components
and/or assemble phones and tablets, many of which are sold abroad under
multinational brand names. Workers in these factories, especially during the
early years, were given very little training and as a result suffered many work-
place injuries on a daily basis. In the early decades of the 1990s, hospitals in
these cities reported that so many fingers were being severed by accidents at
the workplace that they were “collecting human fingers by the bushel” every
day. Workers in electronic factories are often exposed to highly toxic mate-
rials, such as solvents that contain benzene and trichloroethylene. Many of
these workers became seriously ill with liver and lung damage. The State’s
interest is not in enacting or enforcing any vigorous regulations to prevent
toxic work environments.

The brutal factory life of these migrant workers is well document-
ed.“ They often work 12 to 14 hours a day plus overtime. During busy
times when deliveries are due, overtime is imposed on the workers. Even
though the overtime stipulated in their contracts is often limited to 36
hours a month, the reality is that it could be several times over that limit,
to as many as 200 or more hours a month. Their wages average about $30
a month (1,800 RMB) but have been rising in recent years—doubling or
even tripling—mostly due to workers fighting back and negative interna-
tional publicity. The result is that subcontracting firms are moving to other
low-wage countries, such as Vietnam, Bangladesh, and Sri Lanka, as well
as to central China. Most of these subcontracting firms are small but there
are also larger factories employing tens of thousands or even hundreds of
thousands or more workers. For example, the aforementioned Foxconn, is

°° Shenzhen was a small fishing village that was converted into a special economic
zone.

“ https://www.dissentmagazine.org/article/condition-working-class-shenzhen-peas-
antworkers-authoritarian-consumerism

106

Question VII.

a subcontracting firm owned by the Honghai corporation based in Taiwan,
which produces computers and other IT products for Apple, Intel, Dell,
and other IT multinationals, and employs 1.3 million workers in its various
factories. Not all of them are located in Shenzhen and Guangdong, because
some of Foxconn’s production has moved to central China to avoid paying
higher wages. On the surface, these mega-factories look like better places to
work. However, management in these factories enforces strict work rules to
maximize worker productivity. The pace of work is at breakneck speed and
has resulted in well-publicized tragedies. In 2010, 18 workers who could no
longer endure the oppressive work regimen committed suicide by jumping
from high-rise dormitory buildings. 14 of them died.”

Most of the labor struggles of these young migrant workers took the
form of small strikes concerning wages and working conditions and were
settled quickly. However, there were also strikes that lasted longer and had a
significant impact on production. One example is the Nanhai Honda strike
in 2010, which lasted from May 17 through June 4. According to a China
Labor Watch report, since Nanhai Honda was a transmission plant its strike
stopped the production of four auto assembly plants and also sparked strikes
in other foreign-owned car factories. On May 31, 2010, 200 thugs affil-
iated with the local trade union physically assaulted a group of workers.
‘The incident made the Nanhai strike known nationally, well publicized in
national and local newspapers, and garnered support from Chinese aca-
demics. Honda Corporation management finally gave in and agreed to the
workers’ demand, granting an immediate 33% wage increase. The victory
at Nanhai Honda encouraged workers in other auto factories; China Labor
Watch reported that it spread to at least eleven other auto factories.”

China Labor Watch also reported that the strikes at auto companies
that followed the Honda strike all took place in the period of social unrest
in China beginning in the early 1990s. ‘The report said that the Ministry
of Public Security recorded 8,700 incidents of social unrest nationwide in
1993. That number increased to 74,000 in 2004 and then 87,000 in 2005.
By 2006 the Ministry stopped publishing numbers for fear of negative

& Ibid.
6 China Labor Watch, October 25, 2010, http://www.chinalaborwatch.org/ news-
cast/60

% “The Strike Wave,” http://www.chinalaborwatch.org/newscast/60

107

From Victory to Defeat

impact.

Obviously the Nanhai Honda strike was organized, but workers in
China do not actually have a representative labor union. The All-China
Federation of Trade Unions (ACFTU) is a semi-official government union,
often discouraging workers from taking strike actions and is not usually on
the workers’ side in labor disputes or during labor negotiations. ‘The strike at
Nanhai Honda and many other workplaces in China seems to indicate that
labor struggles do not require the same kinds of labor unions as in Western
capitalist countries. Continued struggles at the factories have raised workers’
wages and benefits. Higher wages have resulted in relocating manufacturing
to cheaper countries. These relocations caused many factory closings with
owners fleeing and leaving behind unpaid wages and debts.

Commentators on labor struggles in China recognize the difference
between migrant worker struggles in the newer export manufacturing indus-
tries in the coastal cities and earlier struggles of older workers in factories
built during the socialist period. Labor struggles in the export industries
have been more focused on economic issues, such as wages, benefits, and
working conditions. Worker struggles in factories built before the Reform
were also about economic issues but showed more political consciousness
and ideology. Since such workers built the factories themselves, they believed
the factories belonged to them. ‘The anti-privatization worker struggles in
former state-owned factories, though rarely successful, are of political signif-
icance. These struggles show the political consciousness of workers and the
legacy of socialism. However, during the last few years, workers’ struggles in
factories built in the post-Reform era have begun to turn more political and
ideological. This is a critical turning point in worker struggle in China.

‘The turning point occurred in part because young intellectuals began
to develop a deeper relationship with the working class. During the post-Re-
form era, universities continued offering classes on the theory of Marx,
Lenin, and Mao. However, most of these classes taught by party officials
often deliberately misinterpreted the true meaning of these revolutionary
theories and histories. Students, most of whom were the precious offspring
of the new bourgeois class, showed little interest or, because of the relentless
black propaganda, were even suspicious toward communist theory. But there
were still a small handful of true Marxists tutoring students in study groups

8 Tbid.

108

Question VII.

outside their regular class.

These study groups at Qinghua University and Beijing University
started in the 1990s and continued year after year, impacting different grad-
uating classes. The study groups did more than read books because they
understood Mao's teaching on the importance of practice. As part of their
study they went to visit older workers and learned from them about their
lives during socialism and the hardship and struggle these workers were
going through in the post-Reform era. During their summer and winter
vacations, they went to work in factories in the coastal areas on a short-
term basis. Working in factories—even for a short time—they learned about
the lives and struggles of this new generation of migrant workers. Through
the workers’ experiences the students learned the fundamental differences
between socialism and capitalism.

During the past two decades a number of young men and young
women (perhaps a few hundred), who joined similar study groups in dif
ferent universities, matured from what they learned in their studies and
from the oppression and struggles they witnessed in the society at large—
and made a qualitative leap. They decided to devote themselves to serve the
working masses. They supported workers by helping them resolve problems
and difficulties they encountered in their lives, and they provided services
and organized cultural and recreational activities and study groups. I read
how students from a Chinese medical school gave massages to long-distance
truck drivers. These actions connected the young intellectuals to the work-
ers. They united in struggle. This unity was something the State feared most
because the Chinese Communist Party succeeded in the revolution by estab-
lishing a strong link between the workers and peasants and revolutionary
young intellectuals.

In late 2018 and early 2019, some of these young men and women
supported workers at the Jasic wielding equipment factory in their efforts to
form a union. Throughout these struggles the young intellectuals vowed to
serve the working masses, stating: “We will always be the sons and daughters
of the workers and peasants.” Throughout their struggle, over 100 workers,
students, and others were arrested or disappeared by the government. Their
arrests and disappearances are closely related to the increasingly oppressive
policies and tightening grip on security by the CCP and its Chairman Xi
Jinping. Moreover, the capitalist regime tightened students’ activities on
university campuses, prohibiting activities such as study groups, open dis-

109

From Victory to Defeat

cussions, and publications. These new oppressive policies have had a chill-
ing effect on students and other intellectuals on the Left. However, as long
as exploitation and oppression exist, many intellectuals will continue their
struggle with the exploited and oppressed masses. This has been the moral
fabric of intellectuals in China’s long revolutionary history, a tradition from
the student May 4 Movement in the early 20" century, throughout the long
struggle to Liberation, to the current post-Reform period.

Impact of China’s Capitalist “Reform and Opening Up” on China's
Land, Resources, and Environment

As explained earlier, China has very little arable land. Collective agri-
culture during socialist times enabled peasants to spend numerous hours
improving the quality of the land. During socialist times China was able to
feed its large and growing population by doubling the yield of the available
land. During those years, peasants worked long hours to prepare the soil
before planting. They used treated waste from humans, animals, and vege-
tation to carefully prepare organic compost. Even when chemical fertilizer
became available in the 1970s, peasants only applied it sparingly.

However, after the communes collapsed, the quality of soil in the
countryside steadily deteriorated. As stated above, many young people left
the countryside to find jobs to send money home to support their families.
Those who remained have grown old, and many of them no longer work
in the fields. They hire teams who own farm machinery to do the tilling,
planting, and harvesting. These peasants often apply too much chemical
fertilizer hoping to have a bigger yield in the short-term. The excessive use
of chemical fertilizer has not only destroyed the natural nutrients of the land
and turned it into hard pieces of caked soil, large quantities of chemical fer-
tilizer also flows from the fields into the rivers. Overuse of chemical fertilizer
in agriculture is a serious problem worldwide, but in China the problem
has reached extreme proportions.” The agricultural research extensions that
used to provide the peasants with technical assistance on farming under the
commune system no longer exist.

China has very limited access to fresh water and is one of the 13 coun-
tries with the lowest per capita water supply. After four decades of rapid

® https://www.chinadialogue.net/article/show/single/ch/5153-The-damaging-
cdachaliout-Cltnecefr6lisee and pesticide tse

110

Question VII.

economic growth after the capitalist “Reform and Opening Up,” water in
85% of China's six biggest river systems is now undrinkable—even after
treatment. The percentage of groundwater that is polluted reached 60% in
2013.” Since large quantities of water have been used for industrial pur-
poses, currently 400 out of China’s 600 major cities do not have adequate
water for their residents. Cities continue to dig deeper for water causing
depletion of groundwater. China’s Ministry of Water Resources stated that
this practice not only further aggravates the water shortage, but also lowers
water quality and increases the risk of earthquakes and landslides.”!

Air pollution in China is just as serious. In northern cities air pollu-
tion has reached extremely toxic levels. Readings of particulate matter no
more than 2.5 microns in size (PM2.5), the most harmful type of toxic smog
for people to breathe, routinely reaches 40 times the maximum level allowed
by the World Health Organization.

Although this kind of short-term predatory high growth strategy
brought high profits for China's capitalists, it has deprived China of the

potential for long-term sustainable development.

China’s Capitalist “Reform and Opening Up” and the Deep Internal
Contradictions

The capitalist “Reform and Opening Up” in the past 40 years has
resulted in a polarized society that is full of a wide range of serious contra-
dictions. The Reform created major class contradictions between the broad
masses of toiling people, especially workers and peasants and the small num-
ber (2% to 3% of the population) of powerful political elites who also own
and control tremendous economic power and resources: the new bourgeoi-
sie. Between these two contending forces are the petit bourgeoisie who com-
prise less than 30% of the population but total 300 million people—nearly
matching the total population of the United States or two-thirds of the total
population of the European Union. The petit bourgeoisie—who are the small
to middle-sized business owners, technocrats, housing developers, realtors,
middle-level management and government officials, middle-level military
personnel, academic personnel in universities, and others—have benefited

” The Economist, May 17%-23" 2014, 44.

™ “Chinas Water Shortage to Hit Danger Limit in 2030,” People’s Daily Online: http://
english. peopledaily.com.cn/

111

From Victory to Defeat

from the Reform. The petit bourgeoisie in large and medium-sized cities live
comfortably. They usually own comfortable apartments, stocks and other
properties. They have extra money to spend on cars and other luxury items
and on travel. In 2018 the number of Chinese tourists who traveled abroad
totaled 140 million. Many of them spent lavishly on buying name brand
consumer goods. ‘The petit bourgeoisie provides a buffer between the very
small number of extremely wealthy bureaucrats/capitalists and the broad
masses of working people.

Many migrants who work in the service and construction indus-
tries are also poorly treated. In the construction business, as a rule, workers
receive their full pay only after the project is completed. During the months
while construction is in progress, workers usually receive some subsistence
wages on a weekly or monthly basis. However, many construction contrac-
tors refuse to pay workers what they are owed upon completion of the proj-
ect. There have been reported cases that instead of paying the workers as they
demand, police are called in to use brutal force to disperse them. This kind of
extreme abuse and violence committed by private employers, often with the
cooperation of the police and local government officials, is commonplace.

Peasants suffer similar abuses in the countryside. Two journalists,
Chen Guidi and Chun Tao, investigated and reported on many shocking
cases in Anhui Province. In their Chinese Peasant Investigation Report, Chen
and Chun documented how village officials beat peasants to death.” Pub-
lished in 2003, their book was quickly disappeared from circulation. In
more recent years, there have been many large-scale enclosure movements
through the “Urbanization of the Countryside Project” where incidents of
land grabbing and evictions have become commonplace. Any resistance on
the part of peasants and urban dwellers is brutally suppressed. Since “regu-
lations” prohibit confiscation of farmland, developers—with the aid of local
authorities—deliberately destroy crops in the fields. One incident I heard
about (though not substantiated) was of a developer who poured cement
over the almost harvestable wheat, depriving peasants the last bit of income
they would have otherwise received. Enclosure movements are widespread.
Many urban dwellers have been evicted, even if their houses were only built
a few years before, in designated residential areas, according to the city’s plan.
City authorities simply draw up different plans for developers and bulldoze

”? Chinese Peasant Investigation Report (Zhongguo Nongming Diao Cha) 114.
& Pp a4 gming

112

Question VII.

people’s houses without adequate compensation.

Most of these abuses are not reported; there are few places people can
go to seek justice because the court system is just as corrupt. Many, if not
most, officials of town and city governments and of different administrative
units in the countryside have close connections to underground criminals,
including mafia-type organizations. Criminal activities such as kidnapping,
the operation of prostitution rings and gambling houses, trafficking in ille-
gal drugs, and other illegal activities require and receive the cooperation
and protection of the police. Ordinary people know all too well that the
police can no longer be trusted to uphold and enforce the law against these
criminals. The connection between criminal elements in society and legal
authorities go both ways because the police and private businesses often hire
gangsters to do their dirty work.

Over the past decades, as the burden of environmental pollution
on people and their communities have become more serious, people have
increasingly organized to block the construction of power plants, chemical
factories, and garbage incinerators. Demonstrations against environmental
pollution often involve tens of thousands and even hundreds of thousands of
people. One such demonstration happened in September 2014 in Pingjiang
County, Hunan Province against the construction of a coal-powered electric
plant. The town closed down its high school so students could participate.
More than 10,000 people showed up to the demonstration. The demonstra-
tors held up large signs with messages to Xi Jinping:

“Xi Jinping, do not sacrifice the environment for economic devel-
opment.”

And:

“Xi Jinping, we want green mountains and clear water. We do not
want mountains of gold or silver.”

Another large demonstration in Zigong City, Sichuan Province at the
end of January 2019 also involved more than ten thousand people protest-
ing underground fracking for natural gas. The city experienced three earth-
quakes where two people died. The residents suspected the fracking had
caused earthquakes and demonstrators surrounded the city administration
building to demand that fracking be suspended. The demonstrators finally

113

From Victory to Defeat

dispersed after those responsible promised to abide by the suspension.”

‘The large numbers of protests happening in China reflect many previ-
ously unresolved contradictions and the development of new contradictions.
As living and working conditions continue to deteriorate, and as corrupt
and abusive government officials continue to be uninterested in finding any
real solutions, China’s masses are increasingly frustrated and angry. All the
issues, including land grabbing, factory closings, and environmental pollu-
tion, are problems the masses face every day. These issues manifest in strikes
at the workplace and demonstrations on the streets and in the countryside.
These ongoing incidents show that the contradictions in Chinese society
have reached a heightened level. Xi Jinping has repeatedly called for building
a harmonious society, but most people regard these calls as meaningless rhet-
oric. As the contradictions between the Reformers and the masses intensify,
the government uses more repressive measures to suppress the voice and
actions of the masses.

Chinese society has gone through tremendous changes during the cap-
italist “Reform and Opening Up” in the past four decades. The Left outside
of China have been actively discussing and debating the meaning and signif-
icance of the Chinese revolution, its socialist construction and the capitalist
reform, and how this history has impacted the world. The Left in China,
quite apart from those outside, has also engaged in serious discussions and
debates on these same issues. A short discussion follows on how the Left in
China evaluates the legacy of the socialist past, how they analyze China's
current situation, and their outlook for China’s future.

‘The overwhelming majority of the Chinese people are very proud of
China’s liberation in 1949 and the years of socialist construction; they hold
dear the legacy of Mao Zedong and socialism. For this reason, the capitalists
who knowingly betrayed Mao and what he stood for have had to continue to
use him as a symbol to be worshiped. But most Chinese people have genu-
ine affection toward Mao. Many of them celebrate Mao’s birthday year after
year, and the people designated Mao’s birthday on December 26 as “People’s
Day.” Tens of thousands of people from all over China gather in Shaoshan,
Hunan (Mao’ birthplace) to celebrate every year. In 2018, tens of thousands
of people arrived in Shaoshan on December 25™ and stayed up all night in
the large outdoor square to celebrate Mao’s 125" birthday. They brought

? https://www.chinadialogue.net/article/show/single/ch/5153-The-damaging-truth
about-Chinese-fertiliser-and-pesticide-use

114

Question VII.

flowers, large banners and many red flags, and they shouted slogans and sang
revolutionary songs throughout the night.

During the early years of the Reform, several respected old commu-
nist party loyalists, who no longer played active roles within the Party, kept
writing letters to the Political Bureau voicing their opinions on the reform
policies and presented what they thought were constructive criticisms. Their
letters and opinions were ignored by those in power. These party loyalists
gave hope to some on the Left that there were still healthy elements within
the Party. Thus, some within the Left believed that the Party was not totally
hopeless, and they formed a faction that called for reform from within.

Even before the nationalist revolution in 1911 to overthrow the Qing
Dynasty, nationalism and patriotism has historically played an important role
in China’s political changes because China had been invaded and occupied,
its people exploited and oppressed, by imperialist powers for more than a
century. Mao was a patriot in his youth. There has always been agreement in
China that it needs to be strong in order to fend off aggression from outside.
The question was only how to make China strong. When Japan invaded
China, Mao called on the country to cooperate with the Kuomintang to
defeat the Japanese, because the survival of China as a nation was at stake.
After the Japanese surrendered, the Chinese Communist Party continued
to lead the fight against the Kuomintang until Liberation in 1949. Many
progressive youth joined the fight against the Kuomintang for patriotic rea-
sons, because they believed that the Chinese Communist Party was the only
hope for China’s survival. Those who actually believed in communism were
not the majority. The two-line struggle within the Communist Party during
the socialist construction reflected the divide between the revolutionaries
and those who were fundamentally nationalists. The capitalist roaders rep-
resented by Liu Shaoqi and Deng Xiaoping believed capitalism could build
a strong China. Deng’s famous saying was: “It doesn’t matter whether a cat
is white or black, as long as it catches mice,” meaning: “It does not matter
whether the system is capitalism or socialism. The one that makes China
strong is the best system.”

‘The results of forty years of capitalism in China are obvious. What
most people see depends on whether they have benefited from or have been
hurt by the four decades of capitalism. In other words, their economic inter-
est is an important determinant. However, whether they support the capi-
talist Reform or not is not entirely based on their personal gains or losses;

115

From Victory to Defeat

nationalism and patriotism play a role, especially among China’s intellectu-
als. Many people who are part of the forces against the current regime are
very concerned about the effects of forty years of capitalism on China as a
country and on the Chinese people as a whole. They have seen how capi-
talism changed Chinese society in many negative and detrimental ways: the
abuse and corruption committed by a powerful few, the deterioration of
China’s land and natural resources, the destruction of socialist values, the
hideous crimes against vulnerable people, and the rampant spread of the
underworld of drugs and prostitution. In other words, they have real con-
cern about the future of China and the Chinese people. They actively join
the struggle against unfair treatment of workers, environmental pollution,
genetically engineered foods, and many others.

‘The current opposition forces are not a homogenous group. Within
the opposition there are those with nationalist tendencies who believe the
principal contradiction in China today is between China and other impe-
rialist countries, especially the United States. They believe any political tur-
moil within China invites imperialist countries to intervene. They may dis-
like many aspects of the current regime such the treatment of workers, the
environmental problems, the rampant corruption, and the fact China has
become an extremely polarized country. But they believe the current regime
is the only political force that can protect China’s sovereignty. They see how
aggressive China has been toward other less developed countries in Africa,
Latin America, and other Asian countries, yet they do not condemn China
for being another imperialist country. Instead, they are the apologists for
China’s actions and argue that China treats these countries in a “kinder”
way compared to other imperialists. They tend to turn a blind eye to the fact
that China is pillaging the resources of these countries and oppressing their
people.

Those with nationalist tendencies strongly defend the interests of
Chinese capital. They are very keen on how the CCP handles its economic
relations with other imperialist countries. They do not want the CCP to
give in too much when dealing with other imperialist powers, especially the
United States. They watch carefully how Xi Jinping negotiates with the US
in current trade talks. In turn, the CCP has to be mindful of their influence
on public opinion.

An online recent article on Redchina.cn.net is a good representation
of the views of this group: “Promoting the Anti-America Patriotic National

116

Question VII.

Front’ is the Most Important Mission of the Maoists in China today.”

In this article the author stated that the Left should not focus their
struggle on supporting Jasic workers; instead, the focus should be fighting
the United States, which opposes China’s “2025 Made in China” ambition.”
The article continued to say that this patriotic front should unite not only
those who believe that only socialism can save China but also those (includ-
ing overseas Chinese) who truly have the interests of China in their hearts,
even if these patriotic people may still have illusions about capitalism. The
author uses the historical example of China’s national front against the Japa-
nese and calls for another protracted war against the American imperialists.

‘The article was quickly refuted by another article entitled: “Contradic-
tion Between Classes is the Principal and the Most Important Contradiction in
China,” authored by Zhen Yan. The author asserted that any change happens
mainly through internal factors. He wrote that during socialist years, China
was strong and no imperialist country dared to interfere with China’s inter-
nal affairs because the socialist government had the full support of its people.
Zhen Yan refuted the previous article's attempt to equate China’s current
situation with the time of the Japanese invasion and occupation by saying
that there is not one foreign soldier in China today and the danger Chinese
people face is not external but internal. The article says true Maoists today
should firmly oppose imperialism and revisionism, which is represented by
the elite bureaucratic capitalist class. He also said that for quite a while now,
false Maoists have tried to protect those in power (the current Communist
Party) and make imperialism the principal enemy, ignoring the fact that we
cannot fight imperialism without simultaneously fighting revisionism. Zhen
Yan’s analysis is correct because the interests of China’s bureaucratic capitalist
class are closely linked to global monopoly capital represented by imperialist
powers.

Since those with nationalist tendencies believe only the current regime
can maintain the stability and unity of China, they continue to think that
there are healthy elements within the Party and therefore continue to advo-
cate for reform from within the Party. They once placed their hopes in Bo
Xilai, a prominent government official who advocated for reform. As the
mayor of Chongqing (a major city and province in southwest China), Bo

4 The “2025 Made in China” aan is for China to achieve technological advancement
so it can produce all high-tech products. The article written by Qu Wei Cun Zhen
appeared in: http://www.redchinacn.net/portal.php?mod=view&aid=38336

117

From Victory to Defeat

put forth Chongqing as a model that advocated for a more equal distribu-
tion of income, more public services (such as public housing), cleaning up
government corruption, and cutting down police brutality. However, the
party power center could not tolerate even such moderate reforms proposed
by Bo and got rid of him on some trumped-up charges. Yet it is still difficult
for those who advocate reform from within to give up their hopes. Since Xi
Jinping, more often than previous capitalist rulers, likes to quote Mao, those
who place their delusional hopes in Xi listen to his speeches to count how
many times Xi mentions Mao. In the meantime, Xi has tightened his control
by using punitive measures to prevent the contradictions below the surface
from boiling over.

China and Chinese People in the Future of World Socialist Revolu-
tion

Though forces that resist the oppression have grown in strength, they
are still not strong enough to counter the reactionary forces. In the next few
decades China will become a critical center for the struggle between global
monopoly capital and massive forces of the proletariat.

As noted in the section explaining China’s “Reform and Opening Up,”
changes in China in the past forty years especially since 2000 have greatly
benefited imperialism at the expense of the working people. In 2011 China
surpassed the United States to become the largest manufacturing country in
the world with an industrial workforce of 112 million people, far exceeding
those of other industrial countries. Not only does China have the largest
number of industrial workers, it also has the largest number of labor strug-
gles involving wage disputes, work stoppages and other work-related issues.
In addition to workers’ struggles, there have also been many other economic
and social contradictions in China, including environmental problems, cor-
ruption problems, police brutality, and other forms of oppression. I have
no doubt that many of these contradictions will continue to surface and
sharpen in the coming decades. In a world where capital has become glo-
balized, workers’ struggles and people’s struggles also need to be more con-
nected. In the decades ahead, with all the struggles that are yet to come,
China will be the center of these struggles.

118

Conclusion

What can we learn from the history of China from the past century
since the 1911 Revolution that overthrew the Qing dynasty?

We have learned that people in oppressed nations can rise up and
liberate themselves. During the past one hundred years, Chinese people’s
hopes and aspirations have been for China to be a sovereign nation and to be
treated equally among other nations. The 1911 Revolution was a democratic
revolution of the old type, led by the capitalist class with the goal of destroy-
ing feudalism. That revolution failed when Chiang Kai-shek betrayed the
revolution. As Mao explained in New Democratic Revolution, the democratic
revolution of the old type could not succeed because the capitalist class in
semi-colonial and semi-feudal countries was too weak, and they had to rely
on the landlord class to rule the country. For that reason, it is not possible to
have a democratic revolution led by the capitalist class in a semi-colonial and
semi-feudal country to end feudalism. Mao wrote that only a democratic
revolution of the new type, led by the proletariat, could end feudalism. If
the democratic revolution is led by the proletariat then socialist revolution
will surely follow.

The Chinese Communist Party, founded in 1921 and led by the pro-
letariat, built a strong alliance with China’s peasantry and formed a broad
coalition with the national bourgeoisie. They succeeded in the liberation
of China on October 1, 1949 when Mao declared that the Chinese people
had stood up and a new China was born. Revolutionaries around the world
celebrated with the Chinese people the possibility of building a new society
where people would be free of domination and oppression both from within
and from without. The socialist construction that followed inspired many
revolutionaries, especially those in poor and oppressed nations. In 1956
the Chinese Communist Party galvanized revolutionaries all over the world
when it dared to challenge the revisionists of the Communist Party of the
Soviet Union. Then in 1966, China took another critical step in leading the
anti-revisionist fight by launching the Great Proletarian Cultural Revolution
to struggle against the revisionists within the Chinese Communist Party. The
intensive anti-revisionist struggle during the ten years of the Cultural Rev-
olution exposed the revisionists within the CCP and the capitalist projects
they had tried to implement. Although the struggle between the revolution-

119

From Victory to Defeat

ary line and the revisionist line was at times confusing, chaotic, and even
violent, it demonstrated clearly that if socialist revolution were to proceed,
the struggle against revisionism would be unavoidable—and continuing rev-
olution necessary. The Cultural Revolution also showed the content, form,
and strategy of such an anti-revisionist struggle in a country going through
socialist transition.

During that period in China, the people followed Mao and proceeded
to develop socialism, which liberated them from economic deprivation, class
oppression, foreign aggression, and political persecution. Socialist construc-
tion gave rise to great enthusiasm among Chinese people to put forth their
best efforts to build a China with hope, pride, and aspirations. Within a
short period of two decades Chinese workers, peasants, and intellectuals
built a solid foundation for industry and agriculture for their long-term sus-
tainable development. At the same time China produced enough economic
wealth to improve the livelihood and well-being of a large and growing pop-
ulation, providing them with basic economic security, education, health,
and culture.

Mao’s revolutionary line was defeated after his death in 1976, when
the revisionists in the CCP seized political power and began their capital-
ist Reform. After four decades of capitalist development, high rates of eco-
nomic growth impressed some people enough to believe that China was
on its way to becoming an economic superpower. Those who have such an
outlook must believe that imperialism—as it has existed in the last hundred
years—still has a long way to go. It is helpful to recall that by the last thirty
years of the 20 century, global monopoly capital had run out of places to
expand, requiring as its solution opening up more space for monopoly capi-
tal.”° China’s capitalist Reform came at just the right time to provide a wide-
open space, free of litter and with abundant, cheap, and disciplined labor for

” Tn the late 1990s when the Asian crisis began, the problem of overcapacity (which
had persisted from the early 1970s) worsened. The automobile industry is a good
example of the seriousness of the problem. The Wall Street Journal reported on August
25, 1997 that the worldwide capacity of car production reached 70 million vehi-
cles—32% more than consumers were buying. A 1998 article in The Economist said
that Japanese carmakers had the capacity to produce 14 million cars, but far less than
half that number could be sold on the domestic market. The same article stated,
“Europe is as much plagued by over-capacity as Japan. Car production there is grow-
ing by 4% a year but demand by only 1.5 percent.” (The Economist, March 21, 1998,
p. i Now, in 2018, the overcapacity of automobile industry is plaguing China as
well.

120

Conclusion

global monopoly capital.

Monopoly capital, together with Chinese capital, indeed expanded—
not only in China, but also in India, Brazil, the rest of Latin America and
Asia, and the whole Africa continent.

Forty years later, global monopoly again is running out of places to
expand. In the meantime, rich and poor countries have been flooded with
“made in China” products. China’s land, river, and natural resources are
exhausted and its environment thoroughly polluted from overproduction
and overinvestment. Some experts say that even if it were possible, it would
take much longer than forty years for the environment to recover to where
it was forty years ago. The so-called “China’s miracle” or “the miracle of
monopoly capital” of the past four decades cannot be repeated.

The future of the Chinese people, and in fact the future of all peo-
ple in the world and the natural world itself, depends how long we allow
monopoly capital to dominate the future of the earth and of humanity. That
is to say, our future depends on how revolutionaries can unite the interna-
tional working class to resolutely destroy international monopoly capital, to
end capitalism and to build socialism.

121

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